NCEA Level 3 Accounting 91404 (3.1) — page 1 of 6

SAMPLE ASSESSMENT SCHEDULE

Accounting 91404 (3.1): Demonstrate understanding of accounting concepts for a New Zealand reporting entity

Assessment Criteria

Achievement / Achievement with Merit / Achievement with Excellence
Demonstrate understandinginvolvesapplying accounting concepts to a reporting entity so that its stakeholders are able to make decisions. / Demonstratein-depth understanding involvesexplaining the application of accounting concepts to a reporting entity so that its stakeholders are able to make decisions. / Demonstrate comprehensive understanding involvesjustifyingthe application of accounting concepts to a reporting entity so that its stakeholders are able to make decisions.

Evidence Statement

One / Expected Coverage
(a) / Mighty River Power (MRP) is required to prepare general purpose financial statements because it is accountable to a wide range of external users who are unable to contract for special purpose financial statements.
(b) / This allows users to compare the financial statements from one year to the next to establish trends that assist the users to make decisions regarding MRP and their relationship with it, such as whether should they continue to extend credit.
(c) (i) / Complying with New Zealand General Accepted Accounting Practices (NZ GAAP) means the financial statements are prepared based on New Zealand International Financial Reporting Standards (NZIFRS), which outline rules and procedures for reporting the effects of transactions and other events in the financial statements. If all companies follow the same standards when reporting financial elements in their financial statements, the financial statements are able to be compared from one entity to another – they have the same foundations.
(c) (ii) / Financial statements are expected to show a true and fair view when they comply with NZ GAAP. This means they follow all relevant NZIFRS and include any additional disclosures necessary to ensure a true and fair view is presented.
Not Achieved / NØ / No response; no relevant evidence.
N1 / Any ONE Achievement criteria OR missing Achievement criteria on TWO questions because of lack of context.
N2 / Any ONE Achievement criteria AND missing Achievement criteria on TWO questions because of lack of context.
Achievement / A3 / Candidate gives any TWO of the following Achievement criteria:
  • MRP is accountable
  • reference to comparing financial statements from one year to the next
  • financial statements of different entities are similar / all based on NZ GAAP so can be compared
  • financial statements that comply with NZ GAAP are expected to give a true and fair view.

A4 / Candidate gives any THREE of the following Achievement criteria:
  • MRP is accountable
  • reference to comparing financial statements from one year to the next
  • financial statements of different entities are similar / all based on NZ GAAP so can be compared
  • financial statements that comply with NZ GAAP are expected to give a true and fair view.

Merit / M5 / Candidate gives any TWO of the following Merit criteria:
  • MRP accountable to (a wide range) of external users
  • comparisons allow users to establish trends
  • financial statements following NZ GAAP use the same set of rules / NZIFRS to report items / identifies link between NZGAAP and NZIFRS in financial statement preparation
  • following all relevant NZIFRS gives a true and fair view.

M6 / Candidate gives any THREE of the following Merit criteria:
  • MRP accountable to (a wide range) of external users
  • comparisons allow users to establish trends
  • financial statements following NZ GAAP use the same set of rules / NZIFRS to report items / identifies link between NZ GAAP and NZIFRS in financial statement preparation
  • following all relevant NZIFRS gives a true and fair view.

Excellence / E7 / Candidate gives any TWO of the following Excellence criteria:
  • identifies external users or includes which external user might use the financial statements
  • comparisons / trends enabled by following NZ GAAP / NZIFRS assist with decisions regarding MRP and the user’s relationship with MRP
  • financial statements follow NZIFRS thatset out reporting requirements for transactions and other events so the resulting assets, liabilities, expenses, and income can be compared
  • a true and fair view requires following NZIFRS and providing additional disclosures necessary to ensure a true and fair view
OR any ONE Excellence criteria plus TWO Merit criteria.
E8 / Candidate gives any THREE of the following Excellencecriteria:
  • identifies external users or includes which external user might use the financial statements
  • comparisons/trends enabled by following NZ GAAP / NZIFRS assist with decisions regarding MRP and the user’s relationship with MRP
  • financial statements follow NZIFRS thatset out reporting requirements for transactions and other events so the resulting assets, liabilities, expenses, and income can be compared
  • a true and fair view requires following NZIFRS and providing additional disclosures necessary to ensure a true and fair view
OR any ONE Excellence criteria plus TWO Merit criteria.

NCEA Level 3 Accounting 91404 (3.1) — page 1 of 6

Two / Expected Coverage
(a) / The units assessed as being recorded on meters represent electricity that has been used by customers so the customers owe money to MRP. This represents an increase / inflow of economic benefit in the form of an increase in accounts receivable asset, which will ultimately bring cash into MRP when the customer pays their account.
Sale of electricity increases MRP’s profit, which increases equity. The sale of electricity is to customers of MRP not to the shareholders in their capacity as shareholders.
(b) / MRP knows customers have used electricity (that will show on their meters) that has not been assessed.
Past experience of customer use of electricity allows the amount to be includedin income without bias / in a neutral way OR MRP needs to account for the amount used by customers but not assessed because otherwise the amount for income would not faithfully represent the underlying nature of the transaction.
(c) / Amounts received and receivable are for electricity sold in the current period so are income for the current period. Even though the cash has not been received from receivables the income has been earned in the current period so is reported as income in that period.
(d) / The receivables for energy are customers who owe money for electricity and they will pay MRP in the next year.
Not Achieved / NØ / No response; no relevant evidence.
N1 / Any ONE Achievement criteria OR missing Achievement criteria on TWO OR MORE questions because of lack of context.
N2 / Any ONE Achievement criteria AND missing Achievement criteria on TWO OR MORE questions because of lack of context.
Achievement / A3 / Candidate gives any TWO of the following Achievement criteria:
  • the units on meters will increase economic benefits / assets and increase equity and is not from the owners. (Notes: Does not need to reference electricity sales; customers; or accounts receivable.) May include a reference to decreasing liabilities
  • any reference to the units have been used by customers so represent income
  • any reference to the amounts belonging to the current period
  • any reference to the money being received in the next year.

A4 / Candidate gives any THREE of the following Achievement criteria:
  • the units on meters will increase economic benefits / assets and increase equity and is not from the owners. (Note: Does not need to reference electricity sales; customers; or accounts receivable.) May include a reference to decreasing liabilities
  • any reference to the units have been used by customers so represent income
  • any reference to the amounts belonging to the current period
  • any reference to the money being received in the next year.

Merit / M5 / Candidate gives any TWO of the following Merit criteria:
  • includes units on meters being electricity sold / used by customers, accounts receivable as the asset and links sales to increasing equity by more profit (Note: do not accept reference to liabilities decreasing as this does not apply)
  • reference to past experience informing the amount (of electricity) used, which represents income
  • reference to the electricity being sold in the current period so reported as income for the current period
  • receivables in money owed that will be received by MRP in the next year.

M6 / Candidate gives any THREE of the following Merit criteria:
  • includes units on meters being electricity sold / used by customers, accounts receivable as the asset and links sales to increasing equity by more profit (Note: do not accept reference to liabilities decreasing as this does not apply)
  • reference to past experience informing the amount (of electricity) used, which represents income
  • reference to the electricity being sold in the current period so reported as income for the current period
  • receivables in money owed that will be received by MRP in the next year.

Excellence / E7 / Candidate gives any TWO of the following Excellence criteria:
  • recognises inflow / increase of economic benefit / asset accounts receivable is because customers owe money for electricity used / sold by MRP (and ultimately that money will be received), links the sale to increase in profit (which causes the) increase in equity
  • links knowledge that customers use of electricity that hasn’t been assessed is reliably measured by past experience,with reference to this being neutral measure of income or faithfully representing the income
  • references electricity sold in the current period and makes a distinction between received and receivable
  • links receivables to electricity use / electricity customers who will pay MRP in the next period (thus MRP receives the money).

E8 / Candidate gives any THREE of the following Excellence criteria:
  • recognises inflow / increase of economic benefit / asset accounts receivable is because customers owe money for electricity used / sold by MRP (and ultimately that money will be received), links the sale to increase in profit (which causes the) increase in equity
  • links knowledge that customers use of electricity that hasn’t been assessed is reliably measured by past experience,with reference to this being neutral measure of income or faithfully representing the income
  • references electricity sold in the current period and makes a distinction between received and receivable
  • links receivables to electricity use / electricity customers who will pay MRP in the next period (thus MRP receives the money).

NCEA Level 3 Accounting 91404 (3.1) — page 1 of 6

Question Three – Expected Coverage
Geothermal generation plants have been constructed in the past. A series of past events including labour, materials, and all other construction costs that have been incurred to get the generation plant into a position in which it can be used by MRP to generate electricity.
Only MRP can benefit from the electricity generated by the geothermal plants when it sells the electricity to its customers; or MRP controls the benefits from the generation of the electricity and can exclude others from using the geothermal plant to generate electricity.
MRP gains future economic benefit when it generates electricity (using the geothermal generation plant), which it then sells to customers to earn income and bring cash into MRP. This cash can then be used to repay the bank loan and/or interest, so it is important that the future economic benefit exists from the bank manager’s point of view.
The bank manager can rely on the amount reported as loan security as it can only be reported if it meets the recognition criteria of an asset: probable future economic benefit and reliable measure.
The costs of construction will be based on source documents detailing all of the materials, labour, and overheads that went into the construction of the generation plants. Source documents will faithfully represent the costs as they are neutral and complete as transactions between MRP and suppliers, employees, and others, and are expected to be free from error.
It is probable that MRP has constructed the generation plant to generate electricity in the future so it is probable the future economic benefit will arise – electricity will be generated and sold in the future bringing in the cash needed to repay the loan/interest from the bank manager’s point of view.
The fair value of the generation plant is determined by an independent third party valuation expert so that the amount the plant is carried at in the balance sheet is free from bias/faithfully represents the asset and its potential to generate future economic benefit bringing in the cash needed to repay the loan/interest from the bank manager’s point of view.
Not Achieved / NØ / No response; no relevant evidence.
N1 / Candidate writes about characteristics OR recognition criteria with no context.
N2 / Candidate writes about characteristics AND recognition criteria with no context.
Achievement / A3 / Candidate gives any THREE of the following Achievement criteria:
  • states geothermal plant constructed in the past
  • only MRP can use it
  • MRP will benefit in the futurewhen electricity is generated / sold in the future
  • probable MRP will generate electricity in future
  • reliable measure for the bank manager from construction costs or reliable measure for the bank manager from independent party (for fair value).

A4 / Candidate gives any FOUR of the following Achievement criteria:
  • states geothermal plant constructed in the past
  • only MRP can use it
  • MRP will benefit in the futurewhen electricity is generated / sold in the future
  • probable MRP will generate electricity in future
  • reliable measure for the bank manager from construction costs or reliable measure for the bank manager from independent party (for fair value).

Merit / M5 / Candidate gives any THREE of the following Merit criteria by explaining the following in context of constructed geothermal generation plants:
  • the construction being a past event / series of past transactions resulting in the asset (not just a past transaction as this is not in context)
  • the control – idea of only MRP to benefit / MRP can exclude others from benefitting
  • the future economic benefit through generation and sale of electricity and the bringing of cash into MRP
  • reliable measure of construction costs faithfully represents them to the bank manager
  • reliable measure using third party independent experts faithfully represents the cost of the asset to the bank manager
  • probability of generating electricity and bringing future economic benefit/cash into MRP.

M6 / Candidate gives any FOUR of the following Merit criteria by explaining the following in context of constructed geothermal generation plants:
  • the construction being a past event / series of past transactions resulting in the asset (not just a past transaction as this is not in context)
  • the control – idea of only MRP to benefit / MRP can exclude others from benefitting
  • the future economic benefit through generation and sale of electricity and the bringing of cash into MRP
  • reliable measure of construction costs faithfully represents them to the bank manager
  • reliable measure using third party independent experts faithfully represents the cost of the asset to the bank manager
  • probability of generating electricity and bringing future economic benefit / cash into MRP.

Excellence / E7 / Candidate uses justifications to demonstrate understanding of the nature of a constructed, as opposed to purchased, generation plant in terms of the characteristics and recognition criteria of an asset.
The recognition criteria of reliable measurement or probable future economic benefit is linked to the bank manager being able to rely on the amount reported as security for a loan or for repayments / interest payments.
E8 / Candidate demonstrates comprehensive understanding of the nature of a constructed generation plant, including that it generates electricity to earn future income and cash, being reported as an asset by MRP both in terms of its characteristics and its recognition criteria.
The recognition criteria of reliable measurement faithfully representing costs and probable future economic benefit is linked to the bank manager being able to rely on the amount reported as security for a loan and that the asset will bring cash that can be used to repay the loan.