PART A (25 marks)

(Maximum 1500 Words)

The City of Ballarat*

The monetary
valuation, if any, of an Australian icon – the Eureka Flag – for financial
reporting purposes became, for an episode in its history, the focus and
attention for the custodian of the flag.

The City of Ballarat (the City) in the
state of Victoria is the custodian of the original ‘Eureka

Flag’ – the symbol of the Eureka rebellion (an uprising by goldminers
that took place in Ballarat on 3 December 1854). The flag has acquired iconic
status within Australia. In preparing its financial statements for the year
ending 30 June 2000, the City sought to place,

for the first time,
a monetary value on the Eureka Flag for financial reporting purposes as was
believed to be necessary at the time. According to the head of the Ballarat
Fine Art Gallery, ‘there’s not been a Eureka Flag on the market’ (Danaher,
2000), thus there was no reference point for any financial valuation.

Notwithstanding, the City arrived at a
financial valuation of precisely $10 million that was

reported in the local press (The Ballarat
Courier). It was pointed out that this valuation was

credible because ‘another great
Australian icon’, the admired and prized mounted hide of

Phar Lap, on exhibition at Museum
Victoria, Melbourne, had previously been valued at $10

million for
financial reporting purposes (Danaher, 2000). Hence, at that time, the sum of
$10

million had become an ‘acceptable’
measure of the monetary value of an Australian ‘icon’.

The Mayor of the City of Ballarat,
however, acknowledged that ‘the true value of the flag

could never be recorded in dollars’ and
that it was ‘priceless’ (Danaher, 2000).

In spite of the $10 million financial
valuation, the Eureka Flag was not recognised as an asset

in the statement of financial position of
the City as at 30 June 2000. This treatment was

justified in the notes
to the financial statements for the year ended 30 June 2000, at Note 1(d),
entitled ‘Recognition of non-current assets’, as follows:

“Whilst Council has control over the Eureka Flag, it has not been
included in the financial statements as uncertainty exists as to the
appropriateness of its carrying value. This is due to the unique nature of this
asset and the absence of a market valueâ€

The external
auditor of the City was satisfied with this treatment and did not issue
a qualified audit opinion in auditing the accounts for the financial year
ending 30 June 2000.

*Adapted from Carnegie (2005)

REQUIREMENTS

After considering the following potential
issues in this case:

·
Heritage assets

·
Non-current assets

·
Asset definition

·
Asset recognition

·
Public sector accounting

Prepare a report of
no more than 1500 words, addressed to the Chief Executive Officer of the City
of Ballarat, discussing whether you believe the treatment of the Eureka Flag,
as outlined about, is appropriate. Justify your views by reference to any
relevant accounting theories and pronouncements.

PART B (20 marks)

(Maximum 1000 Words)

“Measurement is arguably the most important concept in the discipline
of accounting, since without measurement; there would be no need for
accounting. The second most important concept is historical cost because it
provides a critical evidentiary perspective to the discipline of accounting.
This also means that for financial reporting purposes, historical cost helps to
ensure reliability and credibility of the financial statements. â€

REQUIREMENTS

You are required to
critically evaluate the above statements. Your answer should
include a comparative analysis of the significant measurement models in
accounting. As a minimum, this should encompass a detailed discussion of
historical cost accounting (outlining the advantages and disadvantages of
the cost model), and at least six(6) alternative measurement models that
have been adopted in current accounting standards.

PART C (15 marks)

(Maximum 750 Words)

Assume that you
have been appointed as a consultant to Intellec-Morph Design Limited (IMDL), a
successful firm in the computer software business, to develop a management
compensation scheme that will motivate managers to maximize the value of the
firm for shareholders. You are permitted to construct individual agreements for
the senior executives of IMDL.

REQUIREMENTS

You are required to write a brief report
to the firm’s remuneration committee covering

the following issues:

1. How (and why)
individual remuneration packages of executives can be structured to motivate
managers to maximize equity value?

2. The extent to which
different forms of compensation can be structured to suit the individual
attributes/characteristics of managers

3.
The various mechanisms that might be employed to
monitor the performance of managers and thus provide assurances to the IMDL
committee that incentive schemes are working.

4. The potential forms
of ex-post opportunistic behaviour that managers may still engage in despite
the existence of performance contracts?

Your report must
include explanations of relevant theories which might support the basis of your
conclusions/recommendations.

FORMAT REQUIREMENTS

It should be a formal essay report. This assignment should be
supported by AASB STANDARDS.
This is a‘thinking’assignmentand what is expected is thepersonal viewsofindividual
students’ based on research and the evidence that has
been sourced. Further, an assignment which presents more quotes than
constructive analysis and argument may also be heavily penalised. What is
critical in this assignment is that students have fully understood the
requirements and have actually answered the questions, for example if asked
whether a position or view is justified, you must answer by stating yes/no,
agree/disagree, or some other similar response depending on the requirements of
the question. Discussion should be followed by logical
development of argument supporting the answer
given. Anexecutive
summaryof approximately200 wordsis recommended forPart
A, B and C separately. The Executive Summary is
NOT INCLUDED IN
THE WORD LIMIT of each Part.The EXECUTIVE SUMMARY
should briefly provide information on the scope
of the question, (ie., your understanding of
the requirements), your research approach and the methods used (ie., what
methods and procedures were engaged to source your

information and to reach your conclusions), and a very
brief summary of the outcomes of your work (usually, what position you have
taken or conclusion you have reached and why).