Question 1:
(i) If we look at the consolidated income statement of Brambles Limited we can clearly understand that they have implemented the function of expense method in order to classify their expenses. This method requires the company to relocate its expenses among functions of the company such as its selling expense, administrative expense, cost of goods sold etc. For instance depreciation of administrative building could be presented as administrative expense by using the function of expense method. However according to the accounting standards the company is still required to release the individual expenses by the nature of expense method to give an overall picture of the company to the investors. If we look at the consolidated income …show more content…
It can be noted that the cost may differ directly or indirectly. The nature of expense method is more basic and easier to understand and implement, the function of expense method, however, requires a further disclosure in the notes to financial statements. If we examine the expenses according to function of expense method we get much more relevant information than the classification according to nature of expense method. But it also has to be noted that function of expense method requires greater skill and judgement when allocating the expenses. I think the company should implement the function of expense method because when we use this method we actually use both function and nature to disclose the information as we have to use nature of expense method to disclose the information in the notes to financial statements. Another reason is that it enables the users to understand our operating revenue and make a much more informed decision. Furthermore this method is so common among companies that it would be easier for us to compare our financial statements with other …show more content…
Deferred tax asset are not yet recognised in the income statement but are created due to taxes being paid or passed forward. If the company pays more tax now for paying less tax in future it is regarded as deferred tax asset. This reduces the future tax liability. Deferred tax liability is created when company pays less tax now for paying more tax in future. This means that company has to pay more tax in the future. Brambles has a net deferred tax liability of US$M 522.40 in its statement of financial position which means that the company will pay more income tax in
(i) If we look at the consolidated income statement of Brambles Limited we can clearly understand that they have implemented the function of expense method in order to classify their expenses. This method requires the company to relocate its expenses among functions of the company such as its selling expense, administrative expense, cost of goods sold etc. For instance depreciation of administrative building could be presented as administrative expense by using the function of expense method. However according to the accounting standards the company is still required to release the individual expenses by the nature of expense method to give an overall picture of the company to the investors. If we look at the consolidated income …show more content…
It can be noted that the cost may differ directly or indirectly. The nature of expense method is more basic and easier to understand and implement, the function of expense method, however, requires a further disclosure in the notes to financial statements. If we examine the expenses according to function of expense method we get much more relevant information than the classification according to nature of expense method. But it also has to be noted that function of expense method requires greater skill and judgement when allocating the expenses. I think the company should implement the function of expense method because when we use this method we actually use both function and nature to disclose the information as we have to use nature of expense method to disclose the information in the notes to financial statements. Another reason is that it enables the users to understand our operating revenue and make a much more informed decision. Furthermore this method is so common among companies that it would be easier for us to compare our financial statements with other …show more content…
Deferred tax asset are not yet recognised in the income statement but are created due to taxes being paid or passed forward. If the company pays more tax now for paying less tax in future it is regarded as deferred tax asset. This reduces the future tax liability. Deferred tax liability is created when company pays less tax now for paying more tax in future. This means that company has to pay more tax in the future. Brambles has a net deferred tax liability of US$M 522.40 in its statement of financial position which means that the company will pay more income tax in