Adoptation of Accounting Stanndards in Financial Statements- Intermediate Financial Statement 1

Topics: Balance sheet, Financial statements, Annual report Pages: 11 (3184 words) Published: February 26, 2013

The purpose of this assignment is to develop learners’ analytical skills in reviewing the adoption of accounting standards in financial statements. In this assignment we are required to assess the accounting treatment of borrowing costs as per FRS 123, by using the latest two years financial statements for two companies listed on the Maldives Stock exchange. Financial Reporting Standard 123 Borrowing Costs (FRS 123) consists of paragraphs 1 to 30. All of the paragraphs in FRS123 have equal authority. FRS 123 should be read in the context of its core principle and the Basis. The companies should follow FRS 123 when preparing company’s financial statements and disclosing information regarding borrowing costs.

The core principle of FRS 123 is borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense. According to FRS 123 an entity shall apply this Standard in accounting for borrowing costs. The Standard does not deal with the actual or imputed cost of equity. An entity is not required to apply the Standard to borrowing cost directly attributable to the acquisition, construction or production of a qualifying asset measured at fair value and the inventories that are produced repetitively in large amounts.

The two companies that I have selected to do this assignment are Maldives Transport and Contracting Company Plc (MTCC) and State Trading Organization (STO).

The first public company in Maldives was incorporated in the year 1980. Maldives Transport and Contracting Company Plc (MTCC) is the very first public company in Maldives. It was incorporated on 18 December 1980.

The good mission, vision and proper core values are the major success of the company. MTCC’s mission is to contribute fully, to the development of the economy and the country. MTCC stated its vision as “to lead in our respective businesses through organic growth and collaborative innovation and creativity in this fast changing socio-economic environment where we foster continuous staff development and be known as the company to be trusted to deliver what the customer wants”. According to MTCC there are as follow: “1. Collaborative innovation and creativity -continuous improvement as a work ethic, 2. Enhancing the work environment for employees -people growth and development, 3. Honesty and integrity - respect the follow individual,

4. Social responsibility - community contribution and responsibility and 5. Profit, but profit from work that benefits the economy - profitable growth”.

MTCC strives to maintain its market position through sustainable business development and strategic growth. MTCC is well known as the leading marine and land transport provider and civil and marine constructor. The company offers various kinds of services such as logistical operations, modern transport services, construction and project management services. MTCC also provide by-products of reputed product brands such as Caterpillar heavy machinery, Yanmar and Suzuki marine engines, Hamilton propulsion system, Castrol lubricants and Sigma protective coatings.

In 1964, a fully state-funded business was set up by the Maldivian government with one key mission to begin with: strengthening national food security. It was then named Athireemaafannu Trading Agency (ATA).

ATA was the beginning of STO, and the catalyst for change in the Maldives. With proven success in contributing to national development, ATA matured to become the State Trading Organization (STO) on 9th June 1979. STO undertook all trading and commercial activity on behalf of the Maldivian government. The nation was growing and so were its demands. While remaining true to its original mission, STO expanded its imports, first to an increasing number of...
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