• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Measurements of tangible assets

Extracts from this document...


´╗┐Introduction Tangible non-current assets may be measured at multitude of measurement techniques in a company?s accounts that under both IFRS and US GAAP regulations. The chairman of the IASB, Hans Hoogervorst, had a speech about ?The imprecise world of accounting? in the International Association for Accounting Education and Research conference recently, which has turned the spotlight on the impact of multitude accounting measurements. Under IAS 16, it prescribes that the accounting treatment for property, plant and equipment, users of the financial statements can recognise information about an organisation?s investment in its property, plant and equipment (PPE) and the changes in such investment (IFRS, 2012). Under the regulation, companies are allowed to choose diversiform measurement techniques either historical cost or fair value as its accounting policy. This essay will define and evaluate various measurements and consider whether the financial statements provide useful information under International Financial Reporting Standards (IFRS). Also, the qualitative characteristic, such as relevance, reliability, comparability and understandability will be applied to ensure the usefulness of the measurements. Depreciation and impairment of the assets will be mentioned which have significant impact of the assets. ...read more.


Cozma (2009) stated that the PPE is under-valuated and the performance of the company cannot be properly evaluated due to profit is over-valuated; the company is exposed to an inflation tax and distributes false dividends, which induces its capital losses. It indicates that that the data may not reliable after marked by inflation, which is not a precise performance indicator. In the following paragraphs, the alternative essential measurement of tangible non-current assets, fair value accounting will be evaluated from its pros and cons. Fair value accounting, which based on the policy of revaluation model, the property, plants and equipment is evaluated reliably can be approved at a revalued price, being its fair market value at the date of the revaluation less any depreciation and impairment. It ensures that the carrying value does not contrast materially from that which would be determined accessing fair value at the end of the accounting period (IFRS, 2012). Although it is very rare to find a company uses fair value accounting to measure the value of tangible non-current assets, it still has some merits to recommend it. First of all, fair value accounting is more appropriate to use the current market value of the asset as it indicates the economic reality of transactions rather than the past view, making it more useful and relevant to users of financial statements. ...read more.


While investors are the prime audience of the financial reports, that the accounting standards setters should enhance the pragmatism and strengthen the underlying principles for presenting useful information of entities? status. Therefore, they should eliminate the variances between methods of measurement, which improve the standards more precise and put more emphasis on qualitative information to enhance the reliability, relevance, comparability and understandability that assist the investors to make informed decisions. Reference Elliott, B. & Elliott, J. (2012) Financial Accounting and Reporting. 15th edn. London: Prentice Hall. Hans Hoogervorst (2012) The Imprecise World of Accounting. International Association for Accounting Education & Research Conference.[Online] Available at: http://www.ifrs.org/Alerts/Conference/Pages/HH-speech-Amsterdam-June-2012.aspx%5B [Accessed: 20 November 2012] IFRS Foundation (2012) IAS 16: Property, plant and equipment. Available at: http://www.ifrs.org/Documents/IAS16.pdf, [Accessed: 20 November 2012] HM Treasury (2012) Tangible Non-current Assets. Available at: http://www.hm-treasury.gov.uk/d/2012_13_frem_chap06_tangible_assets.pdf, [Accessed: 21 November, 2012]. J Sainsbury plc (2012) Annual Report & Financial Statements 2012, Available at: http://www.j-sainsbury.co.uk/about-us/financial-performance/annual-reports/#tabbed_section, [Accessed: 22 November, 2012] Tesco plc (2012) Annual Report & Financial Statements 2012, Available at: http://www.tescoplc.com/files/reports/ar2012/index.asp, [Accessed: 22 November, 2012] Dinan, C.I. (2009) Historical cost versus Fair value, Annals of Faculty of Economics. Shortridge R. P., Schroeder A., Wagoner E. (2006) Fair Value Accounting: Analyzing the Changing Environment, The CPA Journal, Available at: http://www.nysscpa.org/cpajournal/2006/406/essentials/p37.html, [Accessed: 22 November, 2012] ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Accounting section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Accounting essays

  1. A comparison of the financial performance between two onlinefashion retailers during and after ...

    one of the reason for ASOS's success was partly down to its constantly updated stock (Computerweekly, 2009). Secondly ASOS.com was so popular during the recession is that this online fashion retailer has made its name by selling cheaper versions of celebrities' outfits.

  2. How should a limited company value its fixed assets to best inform those who ...

    This can unduly affect the decisions made by and the conclusions drawn by the end users of the company's financial reports data on fixed assets valuation. Michael Elmaleh writing in his book, Synopsis of Financial Accounting: A Mercifully Brief Introduction, concludes that accounting professionals utilizes the historical cost principle in

  1. Accounting For Leases by Lessors. This report is a document that is outlining ...

    To put this into perspective this is 21 times the UK defence budget figure. The main argument is that the bigger companies have a lot of their major lease costs tied up in their fixed assets. The first problem here is the word "global".

  2. Drakensberg Limited Case Report. The main problems are whether to launch a new product ...

    Raw material is still the bottleneck with the highest utilization rate 168% (Appendix 3.1). With this information, we can use the same method as in the analysis of two products above. After calculation (Appendix 3.2), Yabonga still has the highest contribution per raw material, and the new product, Dankie contributes least.

  1. The two companies compared in this report are J Sainsbury Plc and Wm Morrison ...

    x 100% = 7.47% (710/10855) x 100% = 6.54% (904/9149) x 100% = 9.88% (907/8760) x 100% = 10.35% Current Ratio Formula = Current Assets Current Liabilities Sainsbury Morrison 2011 2010 2011 2010 (1721/1221) = 1.41:1 (1853/940) = 1.97:1 (1138/2086)

  2. The topic I have chosen is the Business and financial analysis of a company ...

    defined the forces which drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business. Main aspects of porter?s five forces analysis are: Threats of New Entrants Setting up a new supermarket chain is not easy and comparing to the enormous

  1. Capital budgeting: advantages and limitations

    4.1 Summary The objectives of the study were to identify the advantages of capital budgeting as well as its limitations. The study was conducted using secondary data (books, articles, journals, etc). The study identified Payback Period, Net Present Value, Internal Rate of Return and Real Options Approach as the popular methods used by firms in capital budgeting decisions.

  2. The purpose of this report is to give our client-Sobeys Inc.s board of directors ...

    It is also known as the GAAP for Private Enterprises after Jan 1st, 2011. However, those private firms that choose to adopt IFRS will have to go through substantial amount of conversion processes. The Major Differences between GAAP and IFRS During the past several years, numerous amount of accounting literature

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work