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International Financial Reporting Standard No. 16 provides companies the option of valuing property, plant, and equipment at either historical cost or fair value. If fair value is selected, then the property, plant, and equipment must be revalued periodically to fair value. Under fair value, if there is an increase in the value of the property, plant, and equipment during the reporting period, then the increase is credited to stockholders’ equity. However, if there is a decrease in fair value, then the decrease is reported as an expense for the period. How is the international accounting treatment for changes in fair value for property, plant, and equipment similar to investments?

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 15, Problem 5CP
Textbook Problem
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International Financial Reporting Standard No. 16 provides companies the option of valuing property, plant, and equipment at either historical cost or fair value. If fair value is selected, then the property, plant, and equipment must be revalued periodically to fair value. Under fair value, if there is an increase in the value of the property, plant, and equipment during the reporting period, then the increase is credited to stockholders’ equity. However, if there is a decrease in fair value, then the decrease is reported as an expense for the period.

How is the international accounting treatment for changes in fair value for property, plant, and equipment similar to investments?

To determine

Explain the similarities in valuation of property, plant, and equipment and the valuation of investments under international financial reporting.

Explanation of Solution

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

The following are the similarities in valuation of property, plant, and equipment and the valuation of investments under international financial reporting:

  • The increase in fair value of investments are reported in stockholders’ equity directly...

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Chapter 15 Solutions

Financial Accounting
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