There are still many differences in accounting treatment between International financial reporting standards (IFRS) and the U.S Generally Accepted Accounting Principles (GAAP). While IFRS are widely used by many countries around the world, FASB of the U.S still working on the intention of either adopt the IFRS or converge towards it. Until the convergence actually happens, there are still many critics about the accounting treatment at the same subject under U.S GAAP and IFRS. Example of this is the argument about whether U.S GAAP should allow upward revaluation of non-financial asset of IFRS which was described in details on the article “Upward Revaluation of Non-financial” in the CPA journal November 2012 by David Sardone and Tom Tyson.…show more content… The revalued amount is equal to the fair value at the date of revaluation, minus any subsequent accumulated depreciation and subsequent impairment losses”(Sardone and Tyson, 27). The revaluation model allows companies bring the non-financing assets close to their fair value which is also the standard measurement for available for sale investment under U.S GAAP. Furthermore, if the revaluation reveals that “if an asset’s carrying value is increased as a result of revaluation, the increase is recorded as a component of other comprehensive income, and is carried in equity as an item of other comprehensive income under the heading ‘Revaluation surplus.’ If an asset’s carrying amount is decreased as a result of revaluation, the decrease is to be recognized in profit or loss” (Friedrich, 4). In addition, very similar to the U.S GAAP treatment for available for sale investments, IFRS allows companies to reverse the recognized impairment losses from prior periods for nonfinancial assets. Regarding the treatment for property, plant, and equipment, in contrast with the IFRS upward revaluation of these nonfinancial assets, the U.S GAAP does not allow companies to revalue their non-financing assets and prohibit the reversal of any impairment amounts that are previously estimated. So, under GAAP standard, companies “may not
ACCY200: Financial Accounting IIA School of Accounting and Finance Autumn 2014 Week 8 Tutorial Solutions: Chapter 13, Ex 13.10, Ex 13.15, Ex 13.16 In-class activity: Ex 13.14 Exercise 13.10 REVALUATION OF ASSETS Required 1. Prepare any necessary entries to revalue the building and the vehicle as at 30 June 2013. 2. Assume that the building and vehicle had remaining useful lives of 25 years and 4 years respectively, with zero residual value. Prepare entries to record depreciation expense for the…
recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them. Property, plant and equipment are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than one period. The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:…
cost of debt.The agency costs of debt are: Management will use the debt to increase dividend payments to shareholders; borrow additional funds -> diluting the claim of the existing debt holders; use the funds for a purpose other than that stated (asset substitution); and NOT invest in a positive NPV project as all of the cash flow will flow to the debt holders (under investment). Examples: + For example, managers may want to engage in risky actions they hope will benefit shareholders, who seek…
companies including operators of covered installations recognize them received at free of charge and purchased them at cost as intangible assets on carbon markets, which is recorded as a corresponding credit entry to a provisional liability or to cash. Actually the entities are unwilling to disclose the practices relating to the intangible assets i.e. amortization, revaluation and impairments. Hence, the entities will recognise the cost in income statement and a provisional liability when they emit emissions…
and accurate picture of a company’s assets. Both principles require a company to disclose fair market value information in the notes section of the financial statement. Assets are reported at fair value or book value under both systems, but the fair value option permits but does not require companies to record some types of financial instruments at fair market values in the financial statements. Component depreciation allows for the various parts of an asset to be depreciated separately if they…
points On January 1, 2011, Peterson Corporation exchanged $1,090,000 fair-value consideration for all of the outstanding voting stock of Santiago, Inc. At the acquisition date, Santiago had a book value equal to $950,000. Santiago’s individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $240,000 with an estimated remaining life of six years. The Santiago acquisition was Peterson’s only business…
The companies can sell the assets to fair value at the reporting data. If revaluation is used, business needs to follow the revaluation procedures. Assets that are experiencing rapid price changes must be revalued on an annual basis. Otherwise, less frequent revaluation is acceptable. However, most companies choose to remain the original cost they paid instead to revalue. It is faithful to represent…
Clear and fair view of net financial positions, asset classification in the book, earning indicators, etc. All in euro million Method used: accordance with cost of sales Disclosure of contingent assets and liabilities side Pre-consolidation assumptions ok…
