Deferred tax and intangible assets AASB 112 AASB 138 board advice assignment

ACCM4200 Advanced Financial Accounting – Assessment 3 (2026)
Individual Technical Advice Letter and Video Brief

Subject and Assessment Overview

Subject code: ACCM4200
Subject name: Advanced Financial Accounting
Assessment title: Assessment 3 – Professional Advice Letter and Video Presentation
Assessment type: Individual written assignment and individual video presentation
Weighting: 20% of final grade (Technical Letter 15%; Video Presentation 5%)
Word limit (letter body): 1,000 words (±10%, excluding references and letter header/sign-off)
Video duration: 3–5 minutes
Submission mode: Written report via Turnitin; Video file or link via Moodle
Due date: Monday, Week 10, 11:55 pm (local campus time)

Professional Scenario and Context

You are working as a graduate accountant at Pitcher Group Ltd, a public accounting firm located at 346 Gregory Avenue, Melbourne VIC 3000. The firm’s Manager, Ms Michelle Pitcher, has asked you to prepare a formal letter of advice to respond to an email from one of the firm’s corporate clients, Mr Andrew Dixon, Managing Director of Dixon Ltd, in relation to the financial statements for the year ended 30 June 2020.

The client’s email raises concerns about two main accounting issues. The first issue relates to accounting for deferred tax assets and deferred tax liabilities. The second issue concerns the recognition and measurement of an internally generated brand name. Your task is to provide clear, technically correct advice consistent with Australian Accounting Standards, specifically AASB 112 Income Taxes and AASB 138 Intangible Assets, together with the requirements of the Conceptual Framework.

Client Email – Issues to Address

Your response must directly address the following issues raised in the client’s email.

Re: Accounting Issues: Year Ending 30 June 2020
From: Andrew Dixon (adixon@dixonltd.com.au)
Sent: 5 March 2020
To: Michelle Pitcher (michelle.pitcher@pitchergroup.com.au)

Dear Michelle

Issue 1: At our recent board meeting, several directors raised concerns about spending too many man hours and dollars on accounting for future tax consequences. Their biggest argument was that as long as the tax authority is satisfied and we are not cheating on our tax returns, then we are simply wasting money in accounting for temporary differences and deferred tax assets and deferred tax liabilities, which I must admit is a mystery to me. Do you have any problems if we do not account for the DTAs and DTLs and just account for the current tax liability?

Issue 2: At our recent board meeting several directors raised concerns about an intangible asset relating to the brand name ‘Ezi Kleen’ which has been successfully developed by the business over the past years. The directors want to recognize $900,000 for this asset as at 30 June 2020, being a directors’ valuation. We also spent about $100,000 for branding research. Could you please provide advice on the correct presentation of such intangible assets?

Please respond by letter as I would like to present this to the Board.

I look forward to hearing from you shortly.

Regards
Andrew Dixon
Managing Director, Dixon Ltd
Level 6, 510 King William Street, Adelaide SA 5000

Assessment Task

Part A: Technical Advice Letter (1,000 words)

Prepare a formal business letter addressed to Mr Andrew Dixon that provides technically sound, clearly argued advice on each of the issues identified above. Your letter should be professionally formatted and written in clear, concise language suitable for a board-level audience that is financially literate but not necessarily expert in accounting standards.

Required Content

Letter format

Use a standard business letter layout including sender’s address (Pitcher Group Ltd), date, recipient details, formal salutation, clear subject line, structured body, formal closing, and your name and position.

Issue 1 – Deferred tax (AASB 112)

• Explain the purpose of accounting for income taxes using the temporary difference approach rather than simply reporting current tax paid or payable.

• Define taxable and deductible temporary differences and explain how these give rise to deferred tax liabilities and deferred tax assets under AASB 112.

• Explain why ignoring deferred tax would lead to non-compliance with AASB 112 and potentially misstate both profit and equity.

• Comment on the stewardship, comparability and faithful representation implications for the board and external users.

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• Include at least one worked numerical illustration that shows how a temporary difference arises and reverses over time and how the related deferred tax asset or liability affects tax expense.

Issue 2 – Intangible asset ‘Ezi Kleen’ (AASB 138)

• Explain the general recognition criteria for intangible assets including identifiability, control, and probable future economic benefits, and the need for reliable measurement of cost.

• Apply the distinction between research phase and development phase expenditure, and clarify why research costs such as branding research must be expensed as incurred.

• Discuss the specific prohibition on recognising internally generated brands, mastheads, publishing titles, customer lists and similar items as intangible assets under AASB 138.

• Explain why a directors’ valuation of $900,000 for the ‘Ezi Kleen’ brand cannot be recognised as an intangible asset if it represents an internally generated brand.

• Where relevant, comment on measurement after recognition and impairment testing, even if the brand itself cannot be recognised.

Standards and Conceptual Framework

Support your advice with explicit references to relevant paragraphs from AASB 112 and AASB 138, as well as key Conceptual Framework notions such as faithful representation, relevance, and neutrality.

Overall Recommendation

Provide a brief concluding section in the letter that summarises your advice on both issues and outlines the implications for Dixon Ltd’s 30 June 2020 financial statements.

Part B: Video Presentation (3–5 minutes)

Prepare and record an individual video presentation summarising the key points from your advice letter in a way that could be used at a board meeting of Dixon Ltd.

Video Requirements

• Audience: Board of directors of Dixon Ltd.

• Focus: Highlight the central reasoning, standards references, and implications for decision-making.

• Structure: Brief introduction, Issue 1 summary, Issue 2 summary, succinct recommendations.

• Delivery: Clear, professional spoken English with appropriate pace and tone.

• Visuals: Include short, well-designed slides or visual aids.

• Format and upload: Follow your campus instructions for file naming and submission.

Assessment Criteria and Marking Rubric

Mark Allocation

• Part A: Technical component (Letter) – 10%

• Part B: Communication skills – Letter writing – 5%

• Part C: Communication skills – Video presentation – 5%

Formatting, Submission and Academic Integrity

Formatting Requirements

• Typed, 1.5 spacing, 11 or 12-point font, standard margins.

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• Include page numbers and student details in the header or footer.

• Clearly indicate word count at the end of the letter body.

Referencing

• Use Harvard referencing unless otherwise specified.

• Provide in-text citations whenever drawing on standards or professional guidance.

• Include a complete reference list on a separate page.

Submission Instructions

• Submit the written letter through Turnitin on Moodle.

• Submit the video file or link as per lecturer instructions.

• Late submissions will be penalised in line with institutional policy.

Academic Integrity

• The submission must be entirely your own work.

• Do not copy from other students or online sources.

• Collusion or plagiarism will result in disciplinary action.

Many boards underestimate how quickly poor decisions about deferred tax and internally generated brands can undermine the credibility of published financial statements. Clear understanding of AASB 112 and AASB 138 is essential to ensure that financial reports reflect economic reality rather than management preference. A well-constructed professional advice letter assists directors in understanding why compliance with accounting standards improves transparency and decision-making. A concise video presentation then reinforces these concepts for a non-technical audience.

In addition to the technical requirements of AASB 112 and AASB 138, contemporary financial reporting increasingly emphasises the importance of ethical judgement and professional scepticism when advising corporate boards. Accountants are expected to act in the public interest and to ensure that financial statements are not influenced by management bias or pressure to present overly optimistic results. This professional responsibility supports the broader objectives of transparent and decision-useful reporting (APESB 2010).

References

Australian Accounting Standards Board 2018, AASB 112 Income Taxes, AASB, Melbourne.

Australian Accounting Standards Board 2015, AASB 138 Intangible Assets, AASB, Melbourne.

KPMG 2021, Capitalisation of internally generated intangible assets, KPMG Insights.

Grant Thornton 2013, Deferred tax – a Chief Financial Officer’s guide to avoiding the pitfalls, Grant Thornton International.

ACCA 2025, Deferred tax, Strategic Business Reporting technical article.

Accounting Professional and Ethical Standards Board (APESB) 2010, APES 110 Code of Ethics for Professional Accountants, APESB, Melbourne.