Compare and contrast this with the treatment for assets that are not qualifying assets

Home, - Treatment for assets that are not qualifying assets

Question 1: Pearson Ltd is an Australian listed company. Its results for the financial year ending 30 June 2023 have exceeded expectations-profit before tax is $11.194 million and income tax expense is $2.216 million. As at 30 June 2022, there were 11.700 million ordinary shares on issue. On 11 May 2023, 4.225 million further ordinary shares were issued at a price of $2.99-paid to $2.4. The partly paid shares carry rights to dividends in proportion to the amount paid relative to the total issue price.

Calculate the basic EPS for Pearson Ltd for the year ending 30 June 2023.


Computation of EPS


Amount ($)

Profit Before Tax

$11.194 Million


$2.216 Million

Profit After Tax

$8.978 Million

Basic EPS


Shares in the beginning

11.7 million

Issued during the year

4.225 x 2472.99 x 55/ 365 = 4.7385 million



From the above discussion, it can be concluded that the Basic EPS for June 2023 is 0.5461

Question 2: Explain the ‘qualifying asset' and how do we treat exchange rate differences relating to the acquisition of qualifying assets? Compare and contrast this with the treatment for assets that are not qualifying assets?

Qualifying assets can be described as those assets which take a certain period of time to make themselves prepared to be used in the future. For example, building and other plants and machinery that are under construction are few examples of a qualifying asset as it would take a certain period of time to complete the total construction process. After the same, it is possible to use those buildings and plant and machinery for business purposes. However, there are certain intangible assets as well that form part of qualifying assets, provided those intangible assets are undergoing the development process.

Exchange rate treatment at the time of acquiring a qualified asset

The difference in exchange rates that is directly related to the acquisition or construction of a qualifying asset should be capitalized as part of that asset. The amount of exchange rate to be capitalised, on the other hand, must be certified according to accounting standards. It is commonly observed that only those exchange rate differences are capitalized, implying that the corporation will benefit financially from incurring these charges (Sakawaet al., 2021).
Exchange rate treatment at the time of non-qualifying asset acquisition

If an exchange rate difference arises at the time of acquisition of a non-qualifying asset, and it is observed that the item was initially recorded at a different value, then in that case it is very much essential on part of the accountant to recognize the exchange difference as an income or an expense, as the case may be, in the period when the exchange rate difference takes place.

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