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The historical cost of as asset can usually be determined with exactitude so long as the records showing the amount paid for the assets are still available. Historical cost of fixed assets purchase when new may be known but it will usually be impossible to say what proportion of the original total cost should be regarded as being applicable to that portion of the assets which remain unused at a point in time. Adjustment historical cost this is done by using price index which is attempt to measure the average change in price over a period.
The historical cost of as asset can usually be determined with exactitude so long as the records showing the amount paid for the assets are still available. Historical cost of fixed assets purchase when new may be known but it will usually be impossible to say what proportion of the original total cost should be regarded as being applicable to that portion of the assets which remain unused at a point in time. Adjustment historical cost this is done by using price index which is attempt to measure the average change in price over a period.
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The historical cost of as asset can usually be determined with exactitude so long as the records showing the amount paid for the assets are still available. Historical cost of fixed assets purchase when new may be known but it will usually be impossible to say what proportion of the original total cost should be regarded as being applicable to that portion of the assets which remain unused at a point in time. Adjustment historical cost this is done by using price index which is attempt to measure the average change in price over a period.
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PPT, PDF, TXT o leggi online su Scribd
Historical cost The historical cost of as asset can usually be determined with exactitude so long as the records showing the amount paid for the assets are still available .
The historical cost of fixed assets purchase when new
may will be known but it will usually be impossible to say what proportion of the original total cost should be regarded as being applicable to that portion of the assets which remain unused at a point in time . Historical cost For example :
Imagine that we are dealing with a two year
old car which cost 20000$ and which we expect to have total life of five year . The historical cost of the unused portion of the car is three fifth of 20000=12000 Historical cost We will be aware of the difficulties the determination of the historical cost of stock whether stock should be valued on the basis of average FIFO ... .
The problem is even more acute when trading
stock involved work – in progress and in finished good as the question of the extent to which overhead should be included in the stock figure must be considered similar problem arise when determining the cost of fixed assets which are constructed by a firm for its own use. Historical cost There are assets which have been acquired through barter or exchange a special casa of which are assets purchased in exchange for share in the purchasing company . Yet further problem occur where a number of assets purchase together for example : Where a company purchases the net assets to another company or unincorporate firm. Historical cost Any balancing represent the amount paid for all assets and liabilities not separately identified in the accounting system and is described as good will . Such as allocation has traditionally been made using valued at their replacement cost and liabilities being valued at their face value . Adjusted historical cost We mean the method where by the historical cost of assets is taken to be its original acquisition cost adjusted to account for change in the value or purchasing power of money between the date acquisition and the valuation date . We must be added the problem involved in reflecting the change in the value of money . Adjusted historical cost This is done be using price index which is attempt to measure the average change in price over a period . It must be remembered that this method does not attempt to revalue the assets , it is money . The adjusted historical cost method can be constructed with those approaches under which assets are stated at the current value . Replacement cost Is often referred to as an entry value because it is the cost to the business of acquiring an assets . In a crude term it may be defined as the estimated amount that would have to be paid in order to replace the assets at the date of valuation . Replacement cost The definition includes the word “estimated” because the exercise is hypothetical one in that the method is based on the question . How much would it cost to replace this assets today . The answer has to be found from an examination of the circumstances prevailing in the market for the assets under review , if the assets is identical with those being traded in the market the estimated may be reasonably objective . Replacement cost W indicate some of the possible approaches at this stage :
1. Gross/net replacement cost .
2. Market comparison . 3. Replacement cost of inputs . Gross/net replacement cost The most common approach is to take the cost a new assets and then deduct an estimate of depreciation ,for example : if assets is two year old and is expected to last for another three year , then using straight line depreciation , the net replacement cost is three fifth of the gross replacement cost. Market comparison In the case of some used assets, such as motor vehicles , the assets might be valued by reference to the value of similar used assets . The approach includes as subjective judgment element which is combined with the reasonably objective comparison with the market . Replacement cost of inputs It might be possible to determine an assets replacement cost by reference to the current replacement cost of the various input used in the construction of the assets . The necessary labor input could be costed at the wage rate prevailing at the valuation date with similar procedures being applied to the other inputs-raw material , bought – in component and overheads . Replacement cost of inputs Example : machine which is expected to operate another 2000 hours , anew machine might have a life 4000 hours , and have operating cost less than those of the machine , in this case , the replacement cost of old machine would be half the cost of the new machine less the present value of the savings , In the operating costs , if there is good market in the second hand machine . But if this is not the case the replacement cost will be based on the cost of anew machine after adjusting for differences in capacity and operating cost . IAS : 40 Initial measurement Investment property is initially measured at cost . Measurement subsequent to initial recognition IAS 40 permits enterprises to choose between : 1. A fair value model . 2. A cost model . Fair value model Investment properly is remeasured at fair value , which the property could be exchanged between knowledgeable , willing parties in an arms length transaction Gain or losses arising from changes in the fair value of investment property must be included in net profit or loss for the period Fair value model Fair value should reflect the actual market state and circumstances as of the balance sheet date . IAS 40 The best evidence of fair value is normally given by current prices on an active market for similar property in the same location and condition . A different nature or subject to different condition recent prices on less active market with adjustment to reflect changes in economic condition . With using discounted cash flow projection based on estimates of future cash flow . IAS 40 Fair value model If an entity determine that the fair value of an investment property is not reliably determinable on a continuing basis . The entity shall measure that investment property using the cost model in IAS 16 The residual value of the investment property shall be assumed to be zero . The entity shall apply IAS 16 unit disposal of the investment property . Where a property has previously been measured at fair value , it should continue to be measured at fair value until disposal , even if comparable market transactions become less frequent or market prices become less readily available . Cost model After initial recognition , investment properly is accounted for in accordance with the cost model as set out in property ,plant and equipment –cost less accumulated depreciation and less accumulated impairment losses . IAS 40 Transfers to or from investment property classification Transfers to or from ,investment property should only be made when there is a change in use ,evidenced by : IAS 40 1. Commencement of owner-occupation (transfer from investment property to owner –occupied property) . 2. Commencement of development with a view to sale (transfer from investment property to inventories) . 3. End of owner-occupation (transfer from owner-occupied property to investment property) . 4. Commencement of an operating lease to another party (transfer from inventories to investment property) . 5. End of construction or development (transfer from property in the course of construction /development to investment property) . The following rules apply for accounting for transfers :between categories For transfer from investment property carried at fair value to owner-occupied property or inventories the fair value at change of use is the cost For transfer from owner-occupied property to investment carried at fair value For transfer from inventories to investment property at fair value , any difference between faire value at date of transfer and it previous carrying amount should be recognized in net profit or loss for the period . When an entity completes construction/development of an investment property that will be carried at fair value , any difference between the fair value at the date of transfer and the previous carrying amount should be recognized in net profit or loss for the period .