Defining "Fair Value" Essay

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IFRS: Companies may use either historical cost or revalued amount. Revalued amount is fair value at date of revaluation less subsequent accumulated depreciation and impairment losses (Touche, 2009). Canadian and U.S. GAAP use historical cost as the basis of measurement for property, plant and equipment (Touche, 2009). Revaluations are prohibited in both Canadian and U.S. GAAP (Touche, 2009). So what does that mean for companies not sure of what to choose or needs guidance? Even when a particular IFRS lacks guidance, the application of the IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is required to the company or auditors for fair value guidance in other standards (IFRS, Developing common fair value measurement …show more content…
If a corporation chooses to use the revaluation method, it will need to provide separate records for tax purposes in order to properly document. Tracking the cost and carrying amount of each asset, as well as to make the necessary depreciation and other determinations under the U.S. tax law (Coopers, 2009) will be very costly and time consuming. Again, there is not a set time when revaluation is to be completed and how many times it can be revalued. Thus, this allows for room to misstate.
If a corporation elects to revalue their assets and liabilities, it may also affect the company’s state distribution factors. By choosing this option of revaluation, corporation must consider that it could impact the effective tax rate and cash tax liabilities when completing their taxes as well as the property tax liabilities (Coopers, 2009). “For capital-intensive companies, property, plant and equipment may account for over 25% of their balance sheet.” (Coopers, 2009).
IFRS has optional revaluation for a given asset class equal to fair value at date of revaluation less subsequent accumulated depreciation and accumulated impairment losses-loss in net worth as asset caused by damage, obsolescence and unexpected deterioration. (IAS 16.32). Keep in mind there is no specific date set by IFRS for

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