Fair Value vs Historic Cost

When the FASB originally deliberated Statement 144, it considered and rejected requests for a limited exception to the fair value measurement for impaired long-lived assets that are subject to nonrecourse debt. Some constituents believed that the impairment loss on an asset subject entirely to nonrecourse debt should be limited to the loss that would occur if the asset were put back to the lender. The FASB decided not to provide an exception for assets subject to nonrecourse debt. In its basis for conclusions, the FASB explained that the

Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.

ASC 820 requires that the measurement of fair value of assets acquired and liabilities assumed should be based on the

For our project, we wanted to pick the topic, “Is fair value accounting really fair?” The first part of our presentation was simply explaining what fair value accounting is. This is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transactions. According to the Financial Accounting Standards Board, the price that would be received to sell an asset or price to transfer a liability in an orderly transaction between market participants at the measurement date is the idea behind Fair Value accounting. FASB came up with SFAS 157 to improve this accounting principle. Some of their objectives were to “provide a framework for fair value measurements, change the definition of fair value, elaborate on the concept of market participants.”

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken, NJ: John Wiley & sons.

First, I would like to thank you for hiring my accounting firm to evaluate LJB’s internal controls system. This report will inform you of any new internal control requirements required for LJB to go public, advise you of what the company is doing right, recommend that LJB purchase an indelible ink machine, and advise you what areas the company can improve.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Over the past several years, there has been a growing controversy over the accounting issues of fair values and historical cost. The basis of this controversy revolves around which one of these principles is the most accurate. There are many different viewpoints on this issue. Many accounting professionals believe that fair value is just as accurate as the historical cost principle, while others believe that the historical cost is more reliable. The facts about each of these valuation methods will be researched and explained throughout this research document, as well as the different viewpoint about which method is the most accurate and reliable.

Under International Accounting Standard (IAS) 41, we presume fair value can be reliably measured for a biological asset, or a living animal or plant, and IAS 41 requires measurement at fair value less costs to sell (FVLCTS) from initial recognition of biological assets up to the point of harvest. The only expectation to the presumption is when initial recognition for a biological asset for which quoted market prices are not available as well as for which alternative fair value measurements are determined to be clearly unreliable. Under this situation, IAS 41 requires an entity to measure that biological asset at its cost less any accumulated depreciation

All valuations were valued in accordance with NSW Treasury Policy TPP 14-01 “Valuation of Physical Non-Current Assets at Fair Value”, AASB13 “Fair Value Measurement and AASB 116 “Property, Plant and Equipment” with the following specific treatments:

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

In cost accounting, the lack of understanding of the accounting and finance process by the business manager is an incentive for the unethical employee to manipulate the system. Ethics help management in: · Providing factual and true information to its users, · Determining the nominal price of its products, · Maintaining appropriate professional relationships, and · Maintaining efficacy In today?s world of corporate scandals, an appreciation of ethical standards and a commitment to the proper reporting and disclosure of financial information needs to be constantly reinforced within the area of accounting. Absorption and Variable Costing: Absorption Costing: All costs (fixed and variable) of production are product costs. Which means under absorption costing, both variable and fixed manufacturing costs are included as a part of the cost of the product manufactured.

IFRS 13 provides a principles-based framework for measuring fair value in IFRS. This is based on a number of key concepts including unit of account; exit price; valuation premise; highest and best use; principal market; market participant assumptions and the fair value hierarchy. Fair value is an important measurement on the basis of financial reporting. It provides information about what an entity might realize if it sold an asset or might pay to transfer a liability. In recent years, the use of fair value as a measurement basis for financial reporting has been expanded. Determining fair value often requires a variety of assumptions as well as significant judgment. Thus, investors desire timely and

ACC307 INDIVIDUAL ASSIGNMENT TASK 1: Contemporary Issues of Accounting Theory Fair Value Measurement Overview After the International Accounting Standards Board (IASB) released the IFRS 13 Fair Value Measurement in May 2011 for the purpose of completing its joint project with the US Financial Accounting Standards Board (FASB) on fair value, the Australian Accounting Standard Board (AASB) released the Australian equivalent - AASB 13 Fair Value Measurement in the September of the same year. This standard permitted early adoption but generally started to take effect for the financial reporting periods beginning from 1 January 2013. This new standard requires no new requirement for the adoption and but it was accompanied with the issuing of AASB 2011-8 Amendments to Australian Accounting Standards arising from the AASB 13 which has made consequential changes to 32 standards and 9 interpretations for the adoption in Australia. The new standard attempts to unify IFRS and US GAAP by specifying how entities should apply the fair value measurements that applied in previous IFRS standards. It clarifies and redefines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”, sometimes referred to as an “exit price”. It also sets out a single source guidance for a robust measurement framework to ensure that the requirements are applied consistently and have clear

(BESSONG, 2012) Study the importance of historical value and fair value cost accounting on reported profit. The study discussed how fair value accounting and historical cost accounting will have effect on the reported profit. However it is said that key objective of any business is to earn profit and it is also equally important to report the profit. Especially it is more important to record profit carefully during inflationary period. However they have study the reported profit and effects of fair and historical value by collecting data from both primary and secondary source. Therefore it is found that historical and fair value both is equally important and both have significant effect on the reported profit. Therefore operating profit of the company is influenced by the amount that is paid for taxes, dividend and depreciation.