memo 02

memo 02

Paper details:
Slammon Salmon Ltd (SSL) is an aquaculture business that raises Sockeye Salmon. It measures its biological assets, in accordance with AASB 141 (Agriculture), at fair value less costs to sell. Sockeye Salmon is highly prized for its brilliant red, firm, dense flesh. As at its 30 June 2012 year-end, SSL has 1,000,000 kg of live 10 month-old Sockeye salmon and 100,000 kg of smoked salmon. Table 3-1: Market value and costs of Sockeye salmon at various ages: Age (months) Farmed Salmon Life Stage or Status Retail Price/kg Production Costs Cost to Sell > 8 but < 12 Live and immature $ 8.00 $ 2.00 $3.00 >12 but < 18 Live and immature $10.00 $ 5.00 $2.00 18 Live and mature $16.00 $ 6.00 $1.00 18 Smoked $26.00 $ 4.00* $ .50 * These are the incremental processing costs of smoked salmon and do not include the value of the live and mature salmon that was processed into smoked salmon. Required (treat parts 3a and 3b as separate issues): a) Using the above information, what value should SSL place on its immature Sockeye salmon and smoked salmon assets (value them individually) – Justify by referring to the principles of AASB 141 and/or AASB 102 (Inventory) of the 2012 Handbook. (04 marks) b) During the current year, SSL reduced production costs by half at all life stages by not feeding krill to its Sockeye salmon. However, the Sockeye did not colour-up (i.e., they had white flesh). If unchanged, the lack of colour will reduce their value by half, at all life stages. However, a technician found that by injecting a krill-based food dye into the Sockeye one week before they were harvested, they coloured-up better than if they had been fed krill and became worth three times more (i.e. 50 percent more than if fed krill). The SSL Chief Executive Officer (CEO) noted that the intense colouring is due to the same natural dye as the krill-fed Sockeye, that their customers will never know about the colouring, and that the dye-coloured Sockeye taste better than krill-fed Sockeye. The external auditors and the SSL CEO are arguing over the SSL policy on valuing live immature Sockeye. The auditors want the value of the immature Sockeye to be based on the fair value of the white Sockeye as at the year end. The SSL CEO asserts that the policy is far too conservative and will not give a true and fair view of SSL’s performance. Instead, the CEO wants the increased value at the end of the growthcycle to be anticipated throughout the growth-cycle, rather than as a large lump at harvest. The auditors’ proposal will reduce the Table 3-1 “Retail Price/kg” to half the current value and the CEO’s proposal will increase those values to 1.50 times: i. Advise the SSL CEO (Ms Christine Slammon) as to which of the two proposed policies is the most appropriate by using steps 2-6 of the accounting policy choice model to evaluate the choices. ii. Put a value on the 10 month-old live Sockeye asset, using the more appropriate new policy. Each group is expected to write a memo of ½ to 1½ pages with the following sections: Headers (5 marks) with: To: XXXXXX From: YYYYYYYYY Date: 17/11/2014 Re: (Ideally 6 to 12 words) Please Note: the “re:” line is a few descriptors to help with filing. Context Line (15 marks): One to two sentences that should provide a clear and concise statement of the issues and consequences (i.e. why the reader should read the memo). Action Line (25 Marks): One to three sentences that is like a conclusion but should provide An excellent clear concise statement of how to resolve the issues (i.e. what do you, as the crafter/s of the Memo want the reader to do). Rest of the Memo (25 Marks): Supports the action line. Ideally, it should provide excellent insight plus strong, clear, and concise support for the action line and that support must be clearly tied to the action line. Marking of the Memos (70/10 = 7 Marks each) – The marks given for best 3 of 4 assigned memos or the best 4 of five assigned memos will be added to provide the total mark out of 20 (NB: If four memos are assigned then there are a possible 21/20 marks, but a maximum of 20 marks will be given – if 5 memos are assigned then the mark out of 28 will be multiplied by 0.75 (i.e. 21/28) and again a maximum of 20 marks will be given). The marking Rubric: is given on Blackboard in the assignment section and was based on the following criteria: The purpose of the assessment task is to develop and assess students’ logic, communication, and writing skills. Accordingly, marks are not awarded directly for content but are based on the following attributes: 1. Conciseness, 2. Coverage of the material, and 3. Value to the reader in making a decision. Memo should be Plagiarism free.