Warren Buffett Leadership Style

Actual costing is rarely used because managers can’t wait until the end of the year to obtain product costs. Information about product costs is needed as the year goes for planning, control, and decision making.

10-2 On the premise that the historical cost of acquiring an asset should include all costs necessarily incurred to bring it to the condition and location necessary for its intended use, in principle, the cost incurred in financing expenditures for an asset during a required construction or development period is itself a part of the asset 's historical acquisition cost. The cause-and-effect relationship between acquiring an asset and the incurrence of interest cost makes interest cost analogous to a direct cost that is readily and objectively assignable to the acquired asset. Failure to capitalize the interest cost associated with the acquisition of qualifying assets improperly reduces reported earnings during the period of acquisition and increases reported earnings in later periods.

> The cost principle requires that companies record plant assets at cost. Cost consists of all expenditures necessary to acquire an asset and make it

valuation of many assets in the firm’s financial statements. It is also tied to the demand for

Includes the processes required to ensure that the project is completed within an approved budget. Cost is a resource sacrificed or foregone to achieve a specific objective, or something given up in exchange. Costs are usually measured in monetary units, such as dollars. (Lecture no: 6)

tangible assets, and therefore have to be restated differently. However, we do not know the costs

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

worth and then it no longer exists reducing the projected value of the company (2).

3. Cost Accounting – A vital piece of management accounting, it fulfils both inward and outer groups to the association and is for the most part concerned with costs, costing and cost conduct.

Samuelson believes that the assets definition should concentrate upon property rights that are concerned with wealth, which provides a true balance sheet orientation, rather than being concerned with revenue generation, Samuelson’s definition may lead to an exit value orientation for assets. One of the key points about the property rights approach lies in exchangeability of the asset. Samuelson’s viewpoint would result in certain deferred charges being expensed immediately even though their incurrence may bring about future economic benefits.

The cost basis is the original value of an asset or security at the time it was purchased plus the additional costs associated with it such as settlement and closing costs, fees, commissions, taxes and other adjustments paid to acquire the asset either paid in cash, in trade or through a loan. The cost basis helps determine the capital loss or gain on the sale, exchange, or other disposition of property as well as uses it to figure out deductions for depreciation, amortization, depletion, and casualty losses. If one uses the property for both business or for production of income and for personal purposes, one must allocate the basis based on the use. Only the basis allocated to the business or the production of income part of the property can be depreciated. Your original basis in property is adjusted (increased or decreased) by certain events. For example, if you make improvements to the property, increase your basis. If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis.

In today’s world, definitions of assets are constantly expanding. According to the text book (Deegan, 2012, p. 67) “Defined in the AASB conceptual framework as a resources controlled by the entity as a result of past event and from which future economic benefits are expected to flow the entity”. In simply words, asset is a valuable item that can be control and have future economic benefits. For examples building, land, and equipments.

The explicit cost is the expense done in business which can easily be identified and accounted for in the business at any stage. The explicit cost represents the out flows of cash in clear and obvious terms. When any out flow of credit occurs in a business, it should be identified and should be accounted for immediately.

According to an accounting textbook, cost is defined as a resource sacrificed or foregone to achieve a specific objective. It is something given up in exchange. It is necessary for project managers to understand project cost management since project costs money and consumes resources.

In addition to inherent difficulties in determining the cost of output, management fails to recognize that different cost measurement are needed for different purposes.. If cost information is to be used intelligently, management must understand that any cost figure has inherent limitation and that no