Historical Cost and Fair Value Accounting : Research Project
Added on 2020-06-04
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RESEARCH PROJECT
Table of ContentsChapter: 1 INTRODUCTION..........................................................................................................1Overview of the research: ..........................................................................................................1Background of the study: ...........................................................................................................1Objective of the study:................................................................................................................1Measurement of relationship among historical cost and fair value accounting..........................1CHAPTER: 2 LITERATURE REVIEW.........................................................................................4Accounting review......................................................................................................................4Identification of valuation practices for PPE and intangible .....................................................5CHAPTER: 3 RESEARCH ANALYSIS........................................................................................7Evaluation of Unilever plc accounting policies: ........................................................................7Analysis of BHP Billiton: ..........................................................................................................7In accordance with American express: ......................................................................................8CHAPTER: 4 RECOMMENDATION............................................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
Chapter: 1 INTRODUCTIONOverview of the research: Financial accounting is a systematic field of accounting which is related with summary,evaluation and recording of financial transaction concern to a business. This would consists offormulation of financial statements those are useful for public activity (Botzem, 2012). Thisresearch is provide various information about historical cost and fair value accounting for non-financial assets. It will be explain by using IFRS 13 fair value measurement and IASBframework. Benefits and limitation of various challenges those are helpful in PPE and intangiblein order to review accounting literature. All those practices those are being followed under thebelt of fair value and historical data are analyse under this particular research project. On thebasis of complete evaluation of accounting information some specific suggestion is being drawthose are useful in generating better outcomes in near future.Background of the study: The research is all about collecting necessary information about financial accountingevaluation about historical cost and fair value measurement. It is more effective in recoding andinterpreting better outcomes for the companies (Brief and Peasnell, 2013). There are somespecific measurement methods those are use as a key accounting components which areassociated with IFRS. This research is entirely target all those crucial aspects those are helpful inevaluating positive outcomes between historical cost and fair value in recording of financialtransactions. Objective of the study:The purpose of conducting this particular research is to make comparison among use offair value measurement and historical cost during recording of entries into books of accounts.Use of these concepts in accounting can be beneficial of the company in longer run are analysein more effectively.Measurement of relationship among historical cost and fair value accountingIn every business organisation, whether small or large scale they need to make use ofaccounting system in more proper manner. There are various principles and concepts which hasbeen an issues of large treatment over the last couple of year. As investors has started toharmonise in financial reporting standards in order to gain and compare financial reports those1
are prepare during the year. The two of the main accounting concepts of historical cost and fairvalue accounting is identify as incompatible with one other. Initially, it will deliver benefits to provide a complete comment on use of fair value andhistorical cost accounting in order to determine there core similarity. It has been seen that all theassets and liabilities are analyse and measure and recorded according to it real acquisition cost(Chambers, 2014). However, assets those are tend to have significant value over the time wouldprovide better results those are measure at the time of preparing financial statements of anorganisation. Moreover, reliability and accuracy of mentioned acquisition value are sometimequestionable by investors. Fair value accounting can allow managers to show shareholders withvarious views of company's financial position in terms of assets and liabilities on the basis ofpresent market prices.Concepts of fair value accounting according to IASB, is that the amount for which thatassets would be exchanges or recorded into the statements or liabilities must be settled. In somesituations, it has be argue that reliable market prices can be attain for a particular assets.Historical cost are said to be original cost which is incurred in the previous time in orderto acquire an assets. According to convention that needs assets to be realise at their originalhistorical costs basis.Like for examples:A Machine was acquire for 5years worth for $10000Cost of new machine with similar specification cost $40,000Present market value of machine would be $6,000.Depreciation over its total life of 10years.Net books value: Total cost of machinery – Accumulated depreciation : $10,000- $5000 : $5,000.Note: Accumulated depreciation: 10000*5/10= 5000There are certain exception which are categories as under historical cost are valued athistorical cost can be valued according to various market prices.2
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