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In: Accounting

Saud Bahwan Group has an established presence in fields like automotive, heavy vehicles, construction equipment, special...

Saud Bahwan Group has an established presence in fields like automotive, heavy vehicles, construction equipment, special equipment’s, property and real estate, travel and tourism. Playing a humble role in building a nation. They have well qualified technical, commercial and managerial professionals grouped into specialized teams. The Saud Bahwan Group has come up into many infrastructure and other projects with renowned partners inside and outside the country. In recent times, Saud Bahwan Group have invested in Argentina, who are famous for rich natural resources, export-oriented agricultural sector, and a diversified industrial base.
Sohail Bahwan Group (SBG) purchases several properties in Argentina for starting an industrial unit. Over the last few years, the Argentina currency has been in double-digit inflation and in 2019, inflation recorded at 54.4 %. SBG have to prepare their financial statement and record their transactions for the property they owned

a. If SBG are preparing their financial statement, are they going to adjust the value of their properties with the fluctuation of currency?

b. What benefits SBG will get if they record the same value of their property in their financial statement? How the statement can be consistent, comparable, verifiable and reliable?

Your answer should be around 400 words for each question.

Solutions

Expert Solution

a) As SBG has an established presence and also contributing in building the nation so all the financial statements must reflect the true and fair information. While preparing financial statements SBG should adjust the value of the properties with respect to the fluctuation in the currency.

As it should be compared with international standards and in the entire Industry. It must reflect any such fluctuations. The properties must be carried in the financial statments as per the value of currency as on the date of balance sheet and any profit or loss arising from such fluctuations shall be properly recorded and accounted for.

As per the International Standards of accounting all the inflations and fluctuations in exchange rate must be duly accounted for in the financial statements. Any such changes should b mentioned in notes to accounts.

b) Financial statements should be consistent, comparable, verifiable and reliable in all the respects. The information so depicted should be consistent with the industrial practices and even year to year same accounting method as well as procedure should be followed to ensure consistency which helps to compare with previous year and with other competitors in the same industry.

However, even the information should be made obtained from reliable sources and accurate data should be take so that it can be verified even in future. Accuracy in financial statements and information builds up confidence in stakeholders to rely upon the information so provided in the financial statements.

Same value of property should be reflected in financial statements of SBG so that it ensures that it comply with international standards of accounting. As discussed earlier it even ensures to the stakeholders that the financial statements of SBG are consistent, comparable, verifiable and reliable in all respects.

ekkarill92 answered 2 years ago
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