Company Accounting Answer Question 2022

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student:
Name of the University:
Author’s Note:

1COMPANY ACCOUNTING
Table of Contents
Answer to question 1:......................................................................................................................2
Sub part (a):.................................................................................................................................2
Sub part (b):.................................................................................................................................2
Sub part (c):.................................................................................................................................3
Answer to question 2:......................................................................................................................3
Answer to question 3:......................................................................................................................4
Sub part (a):.................................................................................................................................4
Sub part (b):.................................................................................................................................4
Sub part (c):.................................................................................................................................5
References and bibliography:..........................................................................................................6

2COMPANY ACCOUNTING
Answer to question 1:
Sub part (a):
IFRS 13 deals with the policies and procedures of fair valuation of assets and liabilities
and related disclosures. It defines the fair value of the assets and liabilities as the current market
value of the assets and liabilities. More specifically the net realizable value of assets and the
amount to be paid to meet the obligation of the liability should be considered as the fair value of
the assets and liabilities (IFRS 13: Appendix A). It says that there should be an active market of
the object and the best price quote should be taken into consideration for such valuation. It also
explains the concept of the most advantageous market, but it does not require identifying the
market participants individually. AASB 13, paragraph 22 also clarifies that in measuring the fair
value, market participants need not to be identified but the market participant assumptions should
be used.
Sub part (b):
When an entity is measuring their assets and liabilities to its fair value, they need to use
the market participant assumption. They need to consider the expected cash flow and suitable
discount rates for measuring the value of the assets. Appendix A to the AASB 13 also requires
using the assumption of risk while considering the market participant concept for fair valuation
of the assets and liabilities. The risk inherent in the assets needs to be considered. Therefore, the
rational behavior that a market participant would have done needs to be considered as the market
participant assumption while applying the fair valuation techniques.