Importance Of Fair Value Measurement: Hilton Worldwide

Fair value accounting is appropriate accounting standard for securities brokers. Respectively the business involve are in term of securities view and banking view. Fair value defines as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” In this term paper, we attempt to make sense of the current fair-value and discuss about the pros and cons that are available in fair value accounting. From the research, there are many controversy regarding fair-value accounting results from confusion what is new and different about fair-value accounting as well as different views about the purpose of fair-value accounting. Question 1

While determining beta we need to find out average unlevered beta of similar divisions. Lodging From Exhibit 3 Calculation of unlevered equity beta βU = β/1+(1-tax rate) × (Debt/Equity) Equity Beta Market Leverage Hilton Hotels Corporation 0.88 14% 0.80 Holiday Corporation 1.46 79% 0.47 La Quinta Motor Inns 0.38 69% 0.16 Ramada Inns 0.95 65% 0.46 Average unlevered beta 0.47 Now, calculating levered beta at given target ratio Beta levered (ΒL) = 0.47[1+ (1-0.44) (0.74/0.26)] = 1.21 For lodging division we use 30-year U.S Government Interest rate given in Table B as a risk-free rate which is 8.95%, and for risk premium we use arithmetic average spread between S&P 500 Composite Returns and Long-Term U.S Government Bond Returns given in Exhibit 5 which is 7.43%. Now, Cost of equity (Re) = 8.95% + 1.21×7.43% = 17.94% While determining the cost of debt we again used 8.95%,30 year U.S. Government Interest Rate given in Table B as the risk free rate plus 1.10% debt rate premium above Government rate, which is given in Table A. Cost of debt (Rd) = 8.95% + 1.10% =

The paper “Conservatism in Accounting Part 1: Explanation and Implications” is the first part of a two part series written by Ross L. Watts, where it seeks to examine conservatism in accounting. Part I of Watts’ paper “examines alternative explanations for conservatism in accounting and their implications for accounting regulators” (Watts 2003). Watts defines conservatism as “the differential verifiability required for recognition of profits and losses”. The conservatism adage: “anticipate no profit, but anticipate all losses” can be stated as the precept or motto behind conservatism. Essentially, what Watts is implying is the idea that in order to make a legal claim on any profit or gain a higher degree of verification is required while less

Tax law starts from the assumption that the application of the arm’s length standard will reduce the interference of tax effects with bona fide business decisions taken by the corporate management. The “arm’s‐length” standard provides the right starting point for the analysis. The theory underlying the arm’s length price suggests that transactions governed by arm’s length prices do not only indicate the “right” profit for the particular group company but also the “right” split of revenue for the involved countries. 2.1. COURT PRACTICES OF VARIOUS STATES IN APPLYING ARM LENGTH’S

Introduction: Fair cost is the cost that is estimated or can be determined by the market while historical cost is related to the cost that is fixed i.e. purchasing cost. Fair cost is the cost on which the assets can be sold or exchanged among the different parties and the liabilities can also be settled with the other parties while the historical cost of an asset is that cost on which that particular asset was purchased. The fair value of an asset can be determined from the current situation of the market because it is the market value of the asset while the historical cost is always fixed; it can’t be changed with the passage of time because the cost during the purchase remains the same. The fair value is determined by using some models rather

Basically firm records all of its assets in the financial statements at their original cost (cost which is initially incurred to acquire these assets), but this is not an established rule for recording inventory, and hence at the time of recognizing and valuing inventory in the financial statements, cost principle , which businesses follow for entirely all of their asset is not recognized for inventory. Lower of Cost or Market value states that inventory must always be valued/ recorded at lower of cost

The useful life of an intangible asset is the period over which the asset is expected to contribute to the future cash flows of the entity. Intangibles with a fixed useful are amortized. However, intangibles with indefinite useful lives are not amortized but are subject to impairment. Other relevant factors include the legal or contractual provisions, the level of maintenance expenditures required to obtain future cash flows, and the effects of obsolescence. (para 11 SFAS 142) c) Jonas Tech Corp’s suggested treatment of goodwill is unacceptable because the U.S. GAAP requires that goodwill acquired in a business combination is allocated to the reporting unit through which it was obtained.

Disadvantages of Buying a Real Estate Property under an LLC 1. Difficulty in Formation Forming an LLC for the purpose of buying a property may not be as troublesome as forming a corporation, but it is certainly more tedious than forming a partnership for joint ownership. However, these types of property ownership provides a certain protection against personal liabilities and it is still an appealing advantage when you look at it from a much larger perspective. 2. Personal Liability Shield is Not Absolute Those who have invested in an LLC tends to believe that the protection they are afforded is an ultimate guarantee in which the only possible loss that they can incur is the amount of their investment.

Prepaid revenue is prepayments that a business receives from its customers for delivery of goods or services in the future. Businesses cannot record customer prepayments as recognized revenues until sales to customers are completed based on the revenue recognition principle. Thus, prepaid revenues are liabilities for businesses, and become earned revenues over time as they complete the intended sales. Revenue is recognized under the accrual method at the time the sale is made or the services are rendered because it is at this point that the revenue, if any, can be objectively measured. A third party which is customer has agreed to be bound for a determinable quantity of goods or services at a specified price, and the enterprise has performed the services or delivered the goods, resulting in the "passing of title."

Measurement of the fair value of asset and liability only can refer to the active market. When the market is illiquid, the assets will be recognized at the forced sale values instead of their true values. So, the estimation introduced by the fair value valuation models, and lack of definite measurement indicator causes concerns about the reliability of the fair value measurements has been raised. According to Stephen G. Ryan (2008), when level-2 inputs are driven by forced sales in illiquid markets, the company is allowed to use level-3 model based fair values. However, the use of level-3 model might be difficult to be used by the company because it requires the company to provide to evidence to prove that the market prices are driven by the illiquid markets fire sales.