Silic HBS case study

1969 WordsNov 21, 20138 Pages
Silic Case Report Title of case analysis: Case Silic Date: 2013/11/17 Summary: The Council of Ministers of the European Union approved regulation on applying IFRS for all companies, so Silic, a France-based investment property company, also faces the substantial impact on their accounting standards, needs to choose between historical-cost or fair-value accounting to report its investment properties according to IAS 40. Silic was a major and historical player on the French commercial-property market. It had over 700 individual tenants, ranging from small and medium-sized companies to major multinationals in Paris and surrounding areas. Additionally, Silic had a largely institutional and relatively stable shareholders community. At…show more content…
Historical cost tells the user the acquisition cost of an asset and its depreciation in the following years, it ignores the possibility that the current market value of that asset may be higher or lower than it suggests. 2. Can’t measure the loss of value of monetary assets. Historical cost accounts do not measure the loss of value of monetary assets as a result of inflation. So in case of high inflation, the assets could be mispricing and provoke disturbances in the analysts. The validity of historical-cost accounting is based on the assumption that the currency in which transactions are recorded remains stable, that is to say its purchasing power remains the same over a period of time. B) Fair-value method: Advantages: 1. Comparison. Each company has the data fairly estimated at the same date, so the comparison is possible. Thus, there is a better quality in the information disclosed. The fair-value model enables the comparisons with the financial statements of other property companies. So, fair-value measurement which shows current market conditions provides comparability of the value of financial instruments bought at different times. 2. Relevance for investors Fair-value measurement and presentation of an entity’s assets and liabilities result in increasing relevancy of financial statements information, so that readers of the financial statements will not have to make complex adjustments in analyzing the entity. Furthermore, the fair-value

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