CORPORATE ACCOUNTING AND REPORTING THEORY

Running head: CORPORATE ACCOUNTING AND REPORTING
Corporate Accounting and Reporting
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1CORPORATE ACCOUNTING AND REPORTING
Table of Contents
Answer to Part A:...............................................................................................................2
Introduction:...................................................................................................................2
Explanation of the accounting standard (AASB 13) on fair value measurement:.........2
Conclusion:.....................................................................................................................5
Answer to Part B:...............................................................................................................5
References:........................................................................................................................7

2CORPORATE ACCOUNTING AND REPORTING
Answer to Part A:
Introduction:
“AASB 13 Fair Value Measurement” provides the framework in order to gauge
fair value, which could be applied to various other standards. Fair value is the measure,
which ascertains the amount to be received for selling an asset or paid for transferring a
liability in an orderly transaction between the market participants at the date of
measurement. The application of fair value is made in other standards like “AASB 138
Intangible Assets”, “AASB 3 Business Combinations” and “AASB 116 Property, Plant
and Equipment”. This essay would provide an overview of AASB 13, which is the
accounting standard for measuring fair value in Australia.
Explanation of the accounting standard (AASB 13) on fair value measurement:
Fair value measurement is dependent on the price, which would be obtained for
selling an asset or incurred for transferring a liability orderly. It is utilised for ascertaining
the exit price of an accounting instrument for a market participant owning the asset or
incurred the liability (Abbott and Tan‐Kantor 2018). According to “Paragraph 62 of
AASB 13”, there are three valuation methods, which could be utilised for ascertaining
fair value (Aasb.gov.au 2019). The initial method is the valuation method that takes into
consideration the useful lives of the assets coupled with market information of
comparable or identical items. The second method is the cost approach, which
computes the replacement value associated with the asset. The final method is the
income approach that discounts the estimated future cash flows to a present value
depending on existing market expectations.