How should a limited company value its fixed assets to best inform those who use its financial reports?

The first 200 words of this essay...

UNIVERSITY OF LEICESTER

MANAGEMENT CENTRE

How should a limited company value its fixed assets to best inform those who use its financial reports?

November, 2007

Accounting literature has identified diverse methods that limited companies can utilize to value their fixed assets to provide comprehensive financial information on their company's performance to internal and external stakeholders. The goal of this paper is to consider the different fixed assets valuation systems a limited company can utilize to value its fixed assets in its reporting to best inform readers of its financial performance, with specific focus on the historical cost, net realizable value and the replacement cost methods.

Fixed Assets are defined as "assets that have expected useful lives of more than one year (or normal operating cycle) that are used in the business and are not intended for resale" (Hoskin, Fizzell and Davidson, 2000:462). As business operations are constantly evolving, the value of its fixed assets and liabilities will also be changing. Thus, the valuing and reporting of fixed assets on a balance sheet is affected by the way a business reports its balance sheet items, since all companies are free to decide the valuation methods and