Historical Cost Versus Fair Value Accounting | Report
Added on 2020-05-16
15 Pages2456 Words72 Views
Running head: HISTORICAL COST VERSUS FAIR VALUE ACCOUNTINGHistorical cost versus fair value accountingName of the UniversityName of the StudentAuthors Note
1HISTORICAL COST VERSUS FAIR VALUE ACCOUNTINGExecutive summary:The report is prepared to demonstrate the understanding of the methods of valuation of nonfinancial assets such as intangible and plant, property and equipment. Evaluation of fairvalue and historical cost accounting is done for three companies listed on stock exchanges.These companies are Rio Tinto, Acicia Mining plc and Yaman Gold Plc that have beenanalysed by evaluating their respective financial reports. Moreover, benefits and challengesfaced by these techniques’ have also been discussed.
2HISTORICAL COST VERSUS FAIR VALUE ACCOUNTINGTable of ContentsIntroduction:...............................................................................................................................2Discussion:.................................................................................................................................2Explanation of the measurement concepts in relation to historical cost and fair valueaccounting:.................................................................................................................................2Evaluate the benefits and challenges of using historical cost and fair value accounting forPPE and intangibles:..................................................................................................................2Valuation policies of non financial assets groups of three listed companies:............................2Analysis of consistency of valuation practices across three companies:...................................2Framing an opinion on on the free choice between historical cost and fair value accountingfor PPE and intangibles:.............................................................................................................2Recommendations:.....................................................................................................................2Conclusion:................................................................................................................................2
3HISTORICAL COST VERSUS FAIR VALUE ACCOUNTINGIntroduction:The report is prepared to evaluate the valuation practice of non financial assets ofcompanies regarding their non-financial assets such as intangible assets and plant, equipmentand property. Valuation practices are analyzed in terms of fair value and historical costaccounting. It has been depicted from the analysis of literature review that these two methodsof accounting often come under debate regarding its applicability. Provision of free choice assuggested by IFRS for the non financial assets group have been debated as any particularmethod cannot be made universal as one is suitable in any particular scenario while other issuitable in another scenario (Palea 2014). Report presented here also demonstrates thebenefits and challenges under both the accounting method. For the purpose of evaluation,three companies from three different stock exchanges have been selected. Rio Tinto limitedlisted on Australian stock exchange, Yamana Gold Inc listed New York exchange and Acaciamining plc listed on London stock exchange.Rio Tinto is a leading mining group that is involved in mining and processing ofnatural resources of earth and was established in year 1873. Acacia mining is one of thelargest gold mining producers and is a public company of UK. It is involved in extractinggold from underground mines and open pits and conducts several exploration projects.Yamana Gold plc is company a sustainable producer of gold offering increased leverage andsignificant exposure through growth of mineral resources. All thee selected three companieshave been evaluated for the valuation techniques of their respective non financial assets.
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