FAIR VALUE AND HISTORICAL COST ACCOUNTING By Instructor Institution Location Date Question 1 The debate between Fair Value and Historic Cost Accounting In the recent past, fair value accounting concept has been gaining popularity. In fact, the international accounting bodies such as Accounting Standards Board (IASB) and other international boards prefer fair value accounting to historical cost accounting…
Let us write or edit the essay on your topic
"I. The CEO of the company believes that the company should incorporate fair value accounting from next year while preparing and"
with a personal 20% discount.
The other stakeholders such as employees, suppliers, and stockholders also find fair value accounting more realistic in predicting the trends in business. It is, therefore, easier to ascertain if the business is a going concern concept is on course or otherwise. According to the international accounting standards, fair value refers to the value of an asset or liability, which forms the basis of exchange between willing parties trough arm’s length production. In other words, in free market transactions the fair value is equal to the market prices, which is determined by the forces of demand and supply. The fair value accounting has several models, which include equity approach, mixed approach, income approach, and full fair value. The equity approach incorporates the realized and unrealized profit or losses in the revaluation reserve (Bazley & Hancock, 2013). When any transaction is realized, the changes in fair value will be reflected under equity. Under equity approach, not all the realized gains have any effect on the income statement. The mixed approach on its part, allows all changes in the unrealized fair value to be incorporated in the income statement while the changes in the realized profits or losses are reflected in the income statement as opposed to equity. On the other hand, income approach takes into consideration in the income statement, all the changes in the fair value because of holding losses or gains (Britton & Jorissen, 2007). Finally, under full fair value model, all the changes are incorporated in the income statement including the internally generated goodwill. Proponents of fair value asserts that historical approach has lost its meaning since it does not take into consideration the relationship between market capitalization and the firm’s reported financial performance. For instance, if the firm depreciation policy is based on historical cost accounting, then it becomes increasingly hard to determine the actual market value of equity net worth for the firm. Moreover, it is very hard to ascertain the true financial position of the firm if the firm values its assets based on historical cost accounting (Britton & Jorissen, 2007). On the other hand, the opponents of fair value accounting approach asserts that fair value accounting cannot bridge the gap between market value of all equity and market capitalization. The reason for this is that most accounting practices through the fair value approach do not report the internally generated good will. Due to this fact, it becomes increasingly hard to have a convergence between net assets of the business and the market value for the business. The debate on historical cost and fair value accounting takes into consideration the concept of reliability and relevance. The fact that fair value accounting approach incorporates existing market conditions; it has a better platform to predict the future patterns of the business as compared to the historical approach to accounting. It is therefore widely viewed that historical approach is the most relevant approach used to determine the net assets. However, when the assets are held to maturity, the historical cost approach becomes more relevant since fair value appro ...
Cite this document
(“I. The CEO of the company believes that the company should incorporate Essay”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/115964-i-the-ceo-of-the-company-believes-that-the-company
(I. The CEO of the Company Believes That the Company Should Incorporate Essay)
“I. The CEO of the Company Believes That the Company Should Incorporate Essay”, n.d. https://studentshare.net/finance-accounting/115964-i-the-ceo-of-the-company-believes-that-the-company.
The author states that the company has been seen to perform quite well under the leadership of Mulally. Its performance is attributed to Mulally’s leadership style which is basically a results oriented type of leadership. A results oriented type of leadership highly focuses on the impact or the outcome of exercising leadership.
Accounting for Decision Making Income Statement for Costa Company for the year ended on 31-Dec-12 $ Revenues 624,400 (619,400+5,000) Cost of Goods Sold 412,610 (402,610+80,500-70,500) Gross Profit 211,790 Depreciation expense 18,250 Insurance 1,500 Salaries 61,940 Utilities 7,400 Marketing 5,600 Misc.
Accounting for Decision Making Costa Company For the Period Ending 12/31/2012 Income Statement $ Revenues 619400 Add: Transaction Omitted 5,000 Net Revenues 624,400 Cost of Goods Sold 402,610 Add: Prev. Overstated Inventory 80,500 Less: Restated Inventory -70,500 Cost of Goods Sold 412,610 Gross Profit 211,790 Depreciation expense 18,250 Insurance 1,500 Salaries 61,940 Utilities 7,400 Marketing 5,600 Misc.
The report discusses the SWOT and PESTLE analysis for the business of the fair trading firm. The demand and business of the confectionary market in U.K. is increasing significantly with time. At is highly rational to study the business of Chocolies in this industry. The report throws light on the importance of fair trading in the contemporary world.
Since the US GAAPs are also closely linked to IFRS, FASB wants to bring some change in those GAAPS. To move towards fair value accounting, it published a statement on which it defined fair value accounting and provided some guidelines regarding it it also issued a standard in 2007 giving companies an alternative to value assets and liabilities at fair value .
to accounting using asset values based on the actual amount of money paid for the asset with no inflation adjustment while fairvalue accounting refers to the value of an asset or liability using an arms length transaction between unrelated,
d. The valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use in pricing the asset or liability and the level of the fair value
The nursing staff does not have to develop and decipher treatments but they have to implement and in case of any complications, they have to consult the senior doctor to get directions. The regulatory bodies such as Board of
2 Pages(500 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic I. The CEO of the company believes that the company should incorporate fair value accounting from next year while preparing and for FREE!