Introduction In preparation of financial statements, it is important that an appropriate method is adopted for asset measurement within the financial reporting framework. Asset measurement has been in existence and practiced for years immemorial, for Vehmanen(2013, p.132) measurements involve assigning numeral to objects or events in accordance to a set of rules or standards. The gradual sophistication in financial reporting and evolution of global investment markets together with the increasing knowledgeable investors and financial reporting users have gingered interest in asset measurement methods. Organizations assets such as investments and marketable securities, fixed assets, inventory, intangible assets, etc. require proper valuation for investment potentials, financial reporting, audit, proper tax liability computation, litigation, capital budgeting and company valuation, among others. One of the singular facts for Enron collapse was inappropriate measurement of some of its assets (Benston, 2006, p.465), since there have been debates on choice of asset measurement methods; This paper therefore discusses some methods of asset measurement and analyzes, from the stakeholders’ perspective, which of them provides the most useful and true and fair view of an organization. Asset measurement Models There are various models of asset measurement, these include Historical Cost(HCA), current purchasing power(CPP), replacement cost(RCA) or current cost(CCA), Net realizable
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Asset valuation is the process of assessing the value of a company, real property or any other item of worth, in particular assets that produce cash flows. Asset valuation is commonly performed prior to the purchase or sale of an asset or prior to purchasing insurance for an asset. Asset valuation can be based on cash flows, comparable valuation metrics or transaction
13. FIFO, weighted average, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determination of income and asset valuation.
The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate
Historically, the Du Pont innovation of (ROI) calculations represents one of the most significant turning points in the history of modern accounting and management, (Hounshell, 1998 ). The 1920’s began the Du Pont system company with methods and calculations from leaders, owners, executives, etc. Furthermore, it was the beginning of the integration of financial accounting, capital accounting, and cost accounting. When it comes to return on assets (ROA), they are a (ROI) measure that evaluates the organization’s return or net income relative to the asset base need to generate the income, (Finkler, Ward, & Calabrese, 2013). The Du Pont Company has been the leader of industrial research. Throughout the years with companies emerging, Du Pont’s method was becoming more prominent with owners and executives needing a method for
To determine effectiveness on the company’s management of assets, asset management ratios would give measures indicating such effectiveness. If a company has excessive investments in assets, free cash flow and stock price might be reduced. If a company does not have enough assets, it might lose sales, hurting profitability, free cash flow and stock price (Brigham & Ehrardt, 2008)
Accounting principles are like the Ten Commandments to a CPA. The principles are recommendation or instructions on what an account should follow when logging and informing on all accounting transactions. Businesses rely on their account every month to maintain the financials records of the company. At the end of each month, it is important for every transaction to be documented and posted as a financial entry in the monthly trail balance. An account needs to ensure all journaling is correct; an account must know the importance of how to record prepaid expenses, unearned revenues, accrued expenses, and accrued revenues.
The company's assets at the end of 2011 were $565.27 million. The reason why this is important is it will determine the net worth for the organization. This is used by analysts and investors to evaluate the price of the stock. At the same time, many lenders will often compare the total amounts of assets in with the debt to determine the financial solvency of the corporation. ("Maximus Annual Report," 2011) ("Maximus Annual Report," 2010)
According to the Oxford Dictionary of Accounting intangible asset is ‘’An asset that can neither be seen nor touched’’. In the current market place the most common examples of these types of assets would be goodwill, brand recognition and intellectual properties such as patents, trademarks and copyrights. In this essay I will attempt to answer what difficulties an accountant will face when trying to measure these intangible assets.
An intangible asset is an identifiable non-monetary asset without physical substance. (AASB 138, para 8). In order for an asset to be recognised as an intangible asset three main characteristics have to be met namely they are: (i) identifiable, (ii) non-monetary, (iii) without physical substance. An intangible asset can either be separately acquired or internally generated. This report will focus on the accounting treatment of internally generated intangible assets prior to and after the adoption of IFRS.