Current costs indicate the value paid for an asset or its usage at the reporting date. (Hendriksen & Breda, 1992).Current cost accounting theory encourages to measure and report assets at current cost and it should be measured and presented in the statement of financial position at fair value. Fair-value accounting is the current measurement system to measure elements of financial statements. IFRS 13 “Fair Value Measurement” describes fair value as “the value that would be obtained to sell an asset or paid to transfer a liability in a normal transaction between market participants at the measurement date”.
The current accounting method provides better picture regarding the economic reality of transactions and it is able to provide more relevant
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Market prices reflect all value relevant information. Fair value accounting rises as market value equals value in use on perfect and the complete assumptions of markets.
2. Accuracy and relevancy of information ; Since fair value accounting is able to reflects every little movements in prices accuracy and relevancy of informationis very high.
3. Can be provided timly information. Fair values of assets are able to enhance the transparency of information.
4. Approach to agent principal conflict; Fair value approch reveals the current values, new updations of prices. It decreases costs of the principal-agent problem by allowing shareholders to evaluate the progress of the decisions of the management.
5. It measure the efficiency:fair value accounting measures of efficiency of an organisation. Current cost accounting model seperates the profit that arises from holding assets.
Under IFRS, fair values are commonly used to measure financial assets and liabilities of an organizations. But for the financial assets and liabilities, there is a mixed approach is considered that some items are measured at fair value while other elements are recognized at historical cost method. However, unrealized gains and unrealized losses that are recognized at fair value may or may not influence to the net
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If those inventories are damaged, the cost of inventories may not be recoverable to the company and they have to accept the loss. And also if their selling prices have declined or they have become wholly or partially obsolete, it makes loss to the company. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The thing is that, assets should not be carried in excess of amounts expected to be realized from their sale or use. Most reliable evidence available at the time is used to make estimates of net realizable value. The estimates are made, of the amount the inventories are expected to realize (IASB,
Operational customer supplies stock age will be inventoried monthly and replenishment upon request. A 10% inventory will be conducted monthly on all accountable items. All customer property is always safeguarded in secured in locked areas and only authorize personnel will be allowed entry into these secured locations. Warehouse Manager conducts thorough search for all missing equipment. If any of the customer property is ( lost, missing, stolen, destroyed, or misplaced) controlled equipment, an Financial Liability Investigation of Property Loss form DD form 200 is generated and maintain until completion of investigation, and then file for future
The commissioner of Internal Revenue appeals the Tax Court’s decision that he abused his discretion in requiring Jim Turin & Sons, Inc to use the accrual method of accounting to compute its federal taxes. The taxpayer provide paving services which involves the purchase of asphalt from a sister manufacturing corporation. The taxpayer pays for the asphalt at cost during, this price is determined during the bidding process. The asphalt must be used within several hours of shipment otherwise it will harden and become useless. The taxpayer generally receives payment on the job within 10 to 30 days of billing after the job is completed.
I nventory Value + Purchases – Current Inventory Value = Costs of Goods Sold Cost of Goods Sold / Actual Net Sales = Food Cost percentage Jeremy states that the improvements to the inventory system over the last few years have helped him run his business better.
Thus, they are in a position to cover any debt obligations that may come up quickly. Their inventory turnover has been relatively steady over the five years of data. In year 7 their inventory turnover reached 3.2 which means inventory is moving through to customers at an increased rate over the year which correlates with their increased sales. This statement is supported by the fact that the days inventory held for stoves has dropped over the past five years from 146 days in year 3 to 114 days in year 7. These reductions have allowed for the reduction of their days in accounts payable from 51 all the way down to 11.
The final four chapters of Cocktail Party Economics focuses mainly on the economic concepts of market failure, efficiency and equity. Equity can be defined as the ownership in a company in the form of stocks or shares (Adomait and Maranta, 150) or as the concept that income and wealth is to be distributed in a fair manner (Adomait and Maranta, 110-111). Efficiency is described as a market with a market price that accurately reflects opportunity costs of buyers and sellers who know everything there is to know (Adomait and Maranta, 155). A market failure occurs when a market is unable to serve a society properly and they have failed to make the proper outcome (Adomait and Maranta, 129). These three concepts are key in understanding economics
Mary Aah argument should be tested on goodwill for the first full year. In FASB concepts statement No. 7, using cash flow information and present value in Accounting Measurements, for estimating the fair values used in testing both goodwill and other intangible assets that are not being amortized for impairment. Goodwill of a reporting unit should be tested for impairment between annual tests if an event occurs or circumstances change that would not reduce the fair value of reporting unit.
Month # 1 2 3 4 5 6 Total Forecast demand 600 750 1000 850 750 700 4560 Planned Production 771 771 771 771 771 771 4626 Planned inventory (50) 221 242 13 -66 -45
Companies recognising this can easily set prices that will maximise revenues & market share along with increasing profits and delivering sustained competitive
FAIR is an acronym for Facts, Access, Impacts and Respect. For Business Communication to be Ethical, it must pass the FAIR Test. The FAIR test helps you examine how well you have provided the facts how well you have granted access to your motives and how well you approach respect towards others and how it impacts them as well. According to Cardon (2013), and with the concept of the FAIR approach, it deals with how well and factual communication is, deals with how well facts are presented, how well presented the relevant facts are, and wants to know if any information is misleading. With access, it deals with how well or accessible are someones motives, reasoning, and information.
Throughout the years, several different methods have been developed, which are dependent on the respective regulations of countries and institutions, such as the Internal Revenue Service (IRS). The most common inventory methods include FIFO (first-in, last-out), LIFO (last- in, first-out), HIFO (highest-in, first-out), FEFO (first-expired, first-out), as well as the average costing method (AVCO). Each of them has their specific advantages and disadvantages, and comes with certain restrictions and regulations (Lee and Hsieh, 1983, p.7). This paper is going to take a look at the choice of inventory accounting methods of FIFO and LIFO, and is therefore not going to consider the other inventory accounting methods, as that goes beyond the topic of this
Edmonds, T. P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill
In 2002, the SEC adopted new rules and amendments to address public companies’ disclosure or release of certain financial information that is calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles. The accrual accounting is more popular and be widely used in business world because it produces more accurate and faithful financial statements that constitute better representation of actual circumstances than its main competitors. The major weakness of accrual accounting is that there is some time issue such like the time of occurred and time of recorded would probably be different and it increases the risk of financial information and the risk of correctness. Also, the accrual accounting generally cost more to operate compared with cash accounting
Therefore, their anticipated budget will be $120000 million dollars. This in turn will affects the raw materials budget because they need to buy components which is sufficient to manufacture 3 million bikes and obviously a little more to be in safer position. Based on their sales budget, they would be allocating resources and making sure that there is no wastage of resources. In the same way, Sales budget will affect the other budget too. If the level of sales is high, Raw material Requirement will also be high which in turn will require more labor to process and manufacture this product.
Historical inventory “cost” is used in applying the lower of cost or net realizable value over the entire period that the inventory is held. Write-downs are reversed as selling prices rise. Over the entire period of an enterprise, the amount of expense and profit are the same in the income statement on US GAAP and IFRS. However, the inventory and cost of goods sold balances can vary dramatically in any given period.
However, financial performance subsists with different levels of organisation, which is concerned with measuring financial performance of organisation. These measures are categorised into four that includes profitability, gearing, liquidity or working capital, and investor ratios. However, the financial plan of organisation is associated with operating plan since financial plan involves revenue and expenses for the activities that are linked with each objective. Hence, the main reason, in monitoring financial plan is to audit the committee (Hasan, 2011).