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Saturday, April 16, 2011

MGT613 ASSIGNMENT#1 SEMESTER FALL Solution

Q#1: In your views what would be the existing vision statement of the company?

Answer:

ABC= The name of the company

Vision is just like an art of watching the things invisible. The vision of the

ABC Company is to have such products that are affordable, reliable, safe and environmentally acceptable. This company is high degree characterized and is accountable for successful fulfillment of their company.

Q#2: Prepare a mission statement for new production plan?

Answer:

The mission statement describes the overall purpose of organization. It is the mission statement of ABC Company to develop manufacturing resources and to provide a product of good quality to their customers. They conduct their business responsibly to achieve a great financial return which would be balanced with their long term business growth.

Q#3: What factors you will have to take into account to start a new business?

Answer:

Before starting a new business you should think about the features of the product which you are going to introduce. You must be very well known that why the customers ill get attracted towards your product instead the product of your competitor. You will need a strong research and development department in this regards.

Research and development department should consider the following factors:

• Total project cost

• Availability of professionals

• Availability of labors

• Technology

• Economy

• Experience

• Demand in Market

• Capital

MGT401 spring 2011 Assignment No. 01


“Financial Accounting II (MGT-401)”

Assignment No. 01 Total Marks: 15

LG is one of the most promising and growing company in electronic sector. Now-a-days, it is spending extensively on research and development to improve its products quality and customer satisfaction. LG has a policy of capitalizing development expenditures, but writes off pure and applied kind of research expenditures immediately in accordance with the requirements of IAS-38 (Intangible Assets).

In latest annual report of the company, it includes a page of voluntarily disclosure about the efficiency of the company’s research programs. Results indicate that the company’s prosperity depends on the development of new products and this can be a long term ongoing process.

The company often funded academic research studies into theoretical areas in order to maintain its technical lead. Some of the studies led to breakthroughs which enabled LG to patent and develop into new product ideas. The company argues that the money consumed in this way as a good investment because for every ten unsuccessful projects there is usually at least one valuable finding which generates enough profit to cover the whole cost of the research activities.

Unfortunately, it is impossible to tell in advance which project would succeed in this way.

A major shareholder of the company expressed dissatisfaction at LG’s policy of writing off research cost in this manner. He felt that it would be disproportionately pessimistic if company earned a good return from its research activities. He felt that the company should depart from the requirements of IAS-38 in order to achieve a fair presentation.

Requirements:

Marks (9)

a. You are required to mention three reasons which argue why it might be justifiable for LG to capitalize its research cost?

Solution:-

· Charge all research cost to expense. [IAS 38.54]

· Development costs are capitalized only after technical and commercial feasibility of the asset for sale [IAS 38.57]

· Or uses have been established. This means that the entity must intend and be able to complete the intangible asset and either uses it or sells it and be able to demonstrate how the asset will generate future economic benefits. [IAS 38.57]

· Purchased: capitalize

Initial Recognition: In-process Research and Development Acquired in a Business

Combination

A research and development project acquired in a business combination is recognized as an asset at cost, even if a component is research. Subsequent expenditure on that project is accounted for as any other research and development cost (expensed except to the extent that the expenditure satisfies the criteria in IAS 38 for recognizing such expenditure as an intangible asset).

[IAS 38.34]

b. Explain briefly why IAS-38 compels a rigid set of structure which prevents the capitalization of all research expenditures and make it difficult to capitalize development expenditures?

Solution:-

SUMMARY OF IAS 38

Source = http://www.iasplus.com/standard/ias38.htm

Objective

The objective of IAS 38 is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another IFRS. The Standard requires an entity to recognize an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets. [IAS 38.1]

Scope

IAS 38 applies to all intangible assets other than: [IAS 38.2-3]

· Financial assets

· Exploration and evaluation assets (extractive industries)

· Expenditure on the development and extraction of minerals, oil, natural gas, and similar resources

· Intangible assets arising from insurance contracts issued by insurance companies

· intangible assets covered by another IFRS, such as intangibles held for sale, deferred tax assets, lease assets, assets arising from employee benefits, and goodwill. Goodwill is covered by IFRS3.

Key Definitions

Intangible asset: an identifiable nonmonetary asset without physical substance.

An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected. [IAS 38.8] Thus, the three critical attributes of an intangible asset are:

· Identifiably

· control (power to obtain benefits from the asset)

· Future economic benefits (such as revenues or reduced future costs)

· Identifiably: an intangible asset is identifiable when it: [IAS 38.12]

· is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract) or

· Arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Examples of possible intangible assets include:

· computer software

· patents

· copyrights

· motion picture films

· customer lists

· mortgage servicing rights

· licenses

· import quotas

· franchises

· customer and supplier relationships

· marketing rights

Intangibles can be acquired:

· by separate purchase

· as part of a business combination

· by a government grant

· by exchange of assets

· by self-creation (internal generation)

Recognition

Recognition criteria. IAS 38 requires an entity to recognize an intangible asset, whether purchased or self-created (at cost) if, and only if: [IAS 38.21]

· It is probable that the future economic benefits that are attributable to the asset will flow to the entity; and

· The cost of the asset can be measured reliably.

This requirement applies whether an intangible asset is acquired externally or generated internally. IAS 38 includes additional recognition criteria for internally generated intangible assets (see below).

The probability of future economic benefits must be based on reasonable and supportable assumptions about conditions that will exist over the life of the asset. [IAS 38.22] The probability recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination. [IAS 38.33]

If recognition criteria not met. If an intangible item does not meet both the definition of and the criteria for recognition as an intangible asset, IAS 38 requires the expenditure on this item to be recognized as an expense when it is incurred. [IAS 38.68]

Business combinations. There is a presumption that the fair value (and therefore the cost) of an intangible asset acquired in a business combination can be measured reliably. [IAS 38.35] An expenditure (included in the cost of acquisition) on an intangible item that does not meet both the definition of and recognition criteria for an intangible asset should form part of the amount attributed to the goodwill recognized at the acquisition date.

Reinstatement. The Standard also prohibits an entity from subsequently reinstating as an intangible asset, at a later date, an expenditure that was originally charged to expense. [IAS 38.71]

Initial Recognition: Research and Development Costs

· Charge all research cost to expense. [IAS 38.54]

· Development costs are capitalized only after technical and commercial feasibility of the asset for sale or use have been established. This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. [IAS 38.57]

If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only.

Initial Recognition: In-process Research and Development Acquired in a Business

Combination

A research and development project acquired in a business combination is recognized as an asset at cost, even if a component is research. Subsequent expenditure on that project is accounted for as any other research and development cost (expensed except to the extent that the expenditure satisfies the criteria in IAS 38 for recognizing such expenditure as an intangible asset).

[IAS 38.34]

Initial Recognition: Internally Generated Brands, Mastheads, Titles, Lists

Brands, mastheads, publishing titles, customer lists and items similar in substance that are internally generated should not be recognized as assets. [IAS 38.63]

Initial Recognition: Computer Software

· Purchased: capitalize

· Operating system for hardware: include in hardware cost

· Internally developed (whether for use or sale): charge to expense until technological feasibility, probable future benefits, intent and ability to use or sell the software, resources to complete the software, and ability to measure cost.

· Amortization: over useful life, based on pattern of benefits (straight-line is the default).

Initial Recognition: Certain Other Defined Types of Costs

The following items must be charged to expense when incurred:

o Internally generated goodwill [IAS 38.48]

o Start-up, pre-opening, and pre-operating costs [IAS 38.69]

o Training cost [IAS 38.69]

o Advertising and promotional cost, including mail order catalogues [IAS 38.69]

o Relocation costs [IAS 38.69]

For this purpose, 'when incurred' means when the entity receives the related goods or services. If the entity has made a prepayment for the above items, that prepayment is recognized as an asset until the entity receives the related goods or services. [IAS 38.70]

Initial Measurement

Intangible assets are initially measured at cost. [IAS 38.24]

Measurement Subsequent to Acquisition: Cost Model and Revaluation Models Allowed

An entity must choose either the cost model or the revaluation model for each class of intangible asset. [IAS 38.72]

Cost model. After initial recognition the benchmark treatment is that intangible assets should be carried at cost less any amortization and impairment losses. [IAS 38.74]

Revaluation model: Intangible assets may be carried at a revalued amount (based on fair value) less any subsequent amortization and impairment losses only if fair value can be determined by reference to an active market. [IAS 38.75] Such active markets are expected to be uncommon for intangible assets. [IAS 38.78]

Examples where they might exist:

· Production quotas

· fishing licenses

· taxi licenses

Under the revaluation model, revaluation increases are credited directly to "revaluation surplus" within equity except to the extent that it reverses a revaluation decrease previously recognized in profit and loss. If the revalued intangible has a finite life and is, therefore, being amortized (see below) the revalued amount is amortized. [IAS 38.85]

MGT501 Assignment Solution

Q1. In your opinion, how HR activities are different from administrative activities? (10 marks)

According to latest facts and researches an HR Manager in an organization has become a central person who must be consulted while taking any important decision regarding the organization which cause in separation of HR activities from the administrative activities.

HR activities

Administrative activities

HR sets payroll for employees.

HR help in selection and hiring

HR sets work time for employees.

HR provides compensation benefits

Hr helps in designing leaves system

HR Provide insurance coverage to employees

Administration makes sure its transfer to employees in time.

Administration helps in training and development.

Administration makes sure its implementation

Administration makes sure its transfer

Administration helps in Maintain the leave management system

Administration helps in Maintaining the record of insurance coverage

Q2. Provide an example to explain that HR Manager must be consulted while taking any important decision. (05)

Ans 2:

In this competitive world role of HR Manager is very demanding and makes HR Manger involve in each decision of organization.

In my views HR Manger must be consulted while taking important decision of hiring new employees because in the end these are people (employees) who make the difference. If an organization hires good, honest, educated, energetic, dedicated and experienced persons then organization will grow faster than market.

Eco 401 Idea solution

Assignment No.01 Marks: 20

Question:

Suppose the market demand and market supply for Levis jeans is given by the following equations:

Qd = 5000 – 2.5P

Qs = 4000 + 1.5P

A. Find quantity demanded when price is Rs. 250, Rs. 450 and Rs. 650.

Quantity demand is found by putting the values of P in quantity demand equation.

1. When the price is Rs.250

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(250)

Qd = 4375 units

2. When price is Rs.450

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(450)

Qd = 3875 units

3. When price is Rs.650

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(650)

Qd = 3375 units

B. Find quantity supplied when price is Rs. 200, Rs. 400 and Rs. 600.

Quantity supplied is found by putting the values of P in quantity supplied equation.

1. When the price is Rs.200

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(200)

Qs = 4300 units

2. When price is Rs.400

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(400)

Qs = 4600 units

3. When price is Rs.600

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(600)

Qs = 4900 units

C. Find equilibrium price and equilibrium quantity with the help of above equations.

The equilibrium price for Levis jeans is found by equating Qd and Qs.

At equilibrium, the quantity demand and quantity supply must equal

Qd=Qs

5000 – 2.5P= 4000 + 1.5P

5000-4000=1.5P+2.5P

1000=4P

P=1000/4=250Rs.

Equilibrium price =Rs.250

Equilibrium quantity can found by putting this price in equation of quantity demand or quantity supply

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(250)

Qs = 4375 units

Note:

At equilibrium, at equilibrium, the quantity demand and quantity supply must equal

Qd=Qs

Equilibrium price at 250

5000 – 2.5(250) = 4000 + 1.5(250)

4375 units=4375 units

D. Show the equilibrium condition in Levis jeans market graphically.

MKT630 Assignment Solution

1. What kind of difficulties would the Vermont Teddy Bear meet if it were to

Internationalize its business?

The difficulties that can be faced by the company to go in international market is

1. Size

2. Financial resources,

3. The nature and power of the competition,

4. The nature of the product or service itself

5. The timing of the move relative to competitors should be considered.

The company’s major area of expertise is logistic and operations so in order to penetrate in the foreign market company must understand the difficulties and they challenges they have to face in the international market first of all they have to see if the size of geographical area they going to expand. How are they going to cover this area how the market segmentation will take place in order to be efficient? Then the financial resources required to carry out such kind of operations how they are going to arrange the finances either collaboration with other companies or the sole investment will take place. Loans, equity providing firms are also one of the options. Now as they were not be the only company in that region there must be competition which will prevail in the market. They have to see if the market and competition is strong enough or the weak what will be their deficiencies and what are their strengths and how they are going to compete with existing companies. Also they have to analyze the power of their product if it is generally acceptable in that market or they have trends for these kinds of things. If it is not socially appreciated or adopted then that market will be totally useless they must have trend for the services the company is providing. Last but not the least they have to see if their competitor is not thinking the same think as of them. They have to consider the idea will be the unique and they will be the one who are going to introduce it in the market so they can get a good response. Because if they are not the one to introduce it then their competitor will get the benefits which they have to reap and ultimately become the competitor.

2. How should the company penetrate the foreign markets? Justify your selection.

1. by internet?

2. by physical stores?

3. by a combination of two?

4. by other means?

The answer to this question is kind of a difficult one but according to knowledge we have the following strategy will be best to adopt. First the company has to go by

Indirect Approach:

In indirect approach they have a wide range of selection how they have to do the following

Piggybacking:

Piggybacking is the procedure in which one company uses the other already established company which is already offering services in that area and has all the resources and contacts. And by using their already established resources they can introduce their own products. E.g. small courier companies like OCS uses big companies like TNT, FedEx for their international parcel services also sometimes have arrangements with local courier companies of native countries to deliver the parcels and products.

So by this method they can get to the international market. And by the passage of time when they have enough response from the market then they can go towards

Direct Approach:

In Direct Approach they first use internet then they can make their own stores in the region.

First they advertise properly with the indirect approach i.e.; piggybacking so people got to know that who is the real company and which company is providing the services only. When they get the enough response from market and through internet ads they get the recognition, they must go towards physical stores so people can be diverted to what they must have to be in the end. By adopting this strategy the company can satisfy all the requirements and achieve the goals for which they worked so far.