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. This means that machinery must be measured and presented at their fair value, when acquired. In order to determine the amount to be allocated to machinery, it would have to take into account both direct and indirect costs.

Kenya Ltd usually uses historical costing to measure the value of its assets. 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 will be done on the balance sheet in fixed assets. This section should detail each item and its corresponding amount.

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.