Discuss the appropriate recognition, measurement and presentation (and include amounts where appropriate) of the machinery owned by Kenya Ltd in the 2005 consolidated annual financial statements of Africa Ltd.

2 question 1 40 marks africa ltd

In the consolidated annual financial statements of Africa Ltd for 2005, Kenya Ltd’s machinery should be appropriately recognized, measured and presented. The machinery needs to be assessed at the fair price it was when acquired, and thereafter depreciated over its lifetime. This amount would include direct expenses like the purchase price and any indirect costs, such as delivery or installation.

Kenya Ltd usually uses historical cost accounting when determining the asset’s original value. However if there are significant changes in market conditions over time which result in a decrease/increase of asset’s value then fair value measurement can also be applied instead taking into account current economic circumstances. When it comes to presentation, this should be done on the balance sheet under Fixed Assets section. It will include details about each item and their respective amounts.

Overall, appropriate recognition, measurement and presentation of machinery owned by Kenya Ltd are essential components when preparing consolidated annual financial statements since they provide helpful insights into company’s performance thus allowing decision makers make more informed decisions overall.

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