Concept of Managerial Accounting : Assignment

Added on - 19 Sep 2019

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Running Head: Managerial AccountingMANAGERIALACCOUNTING[Document subtitle]
Managerial Accounting1IntroductionIFRS stands for international financial reporting standards. It is a combination of differentaccounting standards developed by different not-for-profit organization or individual. It alsocalled the international accounting standards. On the other hand, GAAP is known as anotherstandard framework of financial accounting which stands for generally accepted accountingprinciples. It is also known as standard accounting practices or accounting standards.Answer 1Fair value measurements utilized in providing accurate information about the financialstatements of an organization. Both GAAP and IFRS needs an organization to includeinformation related to fair value measurement practices in the notes of their financial statements(Nobes, 2014). According to this system, the organizations need to report assets either at fairvalue or book value, as per the condition. According to the thumb rule, all assets in similar classmust receive the similar treatment of valuation. Regarding the value of receivables, IFRS utilizea two-tiered method that firstly measures individual receivables and then consider receivables asa whole. This is done to detect impairment.Answer 2Component differentiation is an important concept of managerial accounting. It happens when anasset contains different parts that must be depreciated by using different methods. According toIFRS, organizations need to use component depreciation if the part of asset provides differentranges of benefit. The main reason behind this is that component depreciation shows a clearpicture of asset book value. Furthermore, it can be said that component depreciation also
Managerial Accounting2permitted by GAAP. But, business organizations of United States do not use it in practice on afrequently basis.Answer 3Plant assets revaluation is considered as a process of change values from book value to fairvalue. Plant assets revaluation is required at such events where there have been various economicchanges in the market trends. For example, if an organization bought a building 5 years ago andit has appreciated due to the boom and inflation in the country, it can be revaluated to fair value(Deegan, 2013). When the assets are revaluated as per the IFRS standard, it is necessary that allassets belongs from similar class and should treat by using similar valuation method. It happensbecause IFRS wants to maintain consistency in valuations for the similar type of assets.Answer 4IFRS and GAAP both consider cost with the help of development and research. They areseparated into two different parts. Costs included in the research part are always expensed underthe GAAP and IFRS. Furthermore, under IFRS, costs in the development part are utilized ascosts of development to achieve feasibility level. The example, talked about an organization thatspent $ 5 Million on the development of new products and $1 on market research. From its $2million development cost, it spends $ 1500000 on bringing technological feasibility or $ 500000after demonstration of technological feasibility. The example is following (Ahmed, 2013):Expenses on development500,000Expenses on Research1,000,000
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