Corporate Accounting and Reporting: Fair Value Measurement

Running head: CORPORATE ACCOUNTING AND REPORTING
Corporate Accounting and Reporting
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1CORPORATE ACCOUNTING AND REPORTING
Part A: Fair Value Measurement
Introduction:
The fair value measurement is an adequate method that has been deployed by Australian
Accounting Standard Board (AASB) in their financial report framework. This method has
allowed the organisation to represent correct value of their assets, as it helps the investors to
detect their current financial position. Furthermore, the different fair value standard used by
AASB has also been addressed, which allows the investors to detect the fair market values of the
company’s position. The standard such as AASB 138, AASB 3, AASB 116, and AASB 13 is
mainly used by the organisation in Australia to determine the accurate value of their assets that
will be presented in the annual report (Aasb.gov.au 2019).
Explaining the accounting Standard on fair value measurement:
Fair value measurement is implemented by AASB in financial report framework to
identify the fair value of the assets listed by the organisation. The fair value method is listed in
‘AASB 13 Fair Value Measurement’ to detect the market value of assets that is being used by the
company in their operations. In addition, the fair value measurement is adopted by the
organisation to represent their correct valuation to the investors. There are different levels of
valuations, which can be conducted by companies to detect the market level of their assets and
liabilities. Moreover, AASB provides the organisation with valuation method, cost approach
method and income approach method, which can used for detecting the fair value of their assets.
Paragraph 62 of AASB 13 depicts the three-valuation method that can be used by the
organisation to detect the fair value (Aasb.gov.au 2019). Malone, Tarca and Wee (2016)

2CORPORATE ACCOUNTING AND REPORTING
mentioned that without the fair valuation process the organisation has to project abnormal loss or
gains in their annual report when disposing the assets of the organisation.
The initial method valuation allows the organisation to evaluate the useful lives of the
assets and compares with the market information of identical items. The income approach
method allows the organisation to discount the future cash flows and detect the present values as
per the market expectations (Majercakova and Skoda 2015). Lastly, the companies can use cost
approach method for detecting the replacement value of the assets. Companies for addressing the
fair value measurement of their assets can use the above-identified methods. The AASB 3 also
provides the organisation with recognition method of detecting the fair value of liability and
assets, which are transacted. The Paragraph 3 of AASB 3 indicates that transactions conducted
for acquisition of assets and liabilities conducted by the business. The Paragraph 18 of AASB 3
also indicates that acquisition conducted by the organisation needs to be realised at the fair
values, where dates of acquisition is used for detecting the actual values of the assets
(Aasb.gov.au 2019). In addition, under the Paragraph 18 of AASB 3, the acquiree realizes the
transfer of the assets at fair value, which need to be at the acquired date. Furthermore, the
organization needs to evaluate the assets on the date of the acquisition, where the assets have
been transferred from the acquiree to acquirer. The further evaluation of AASB 3 Paragraph 45
directly helps in detecting that when it is not possible to ascertain the fair value before the end of
the accounting year adequate provisional amounts needs to be recognized depending on the
reasonable estimate. This would eventually help your organization to portray the actual valuation
of the asset at the end of the fiscal year (Yao, Percy and Hu 2015).
Property, plant and equipment valuation is depicted in Paragraph 15 of AASB 116, which
allows the organization to portray the actual value of the assets in the financial report. Moreover,