Financial Reporting And Management Assignment

Added on -2020-02-17

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Financial Reporting AndManagement
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Valuation techniques as per the guidelines of IASB for financial reporting and IAS 1311.2 Discussion over the reliability and measurement of fair value technique........................31.3 Disclosure requirements as per IFRS 13..........................................................................4TASK 2............................................................................................................................................52.1 Discussion over the key definition of of various terms which are used for differentiatingdebt and equity as per IAS 32.................................................................................................52.2 Discussion over the key characteristics or the criteria which are used to makedifferentiation between debt and equity under IFRS IAS 32. Discussion of type of financialinstruments and how they recognised in financial statements................................................72.3 Discuss over the issues which recognises convoluted financial instruments present infinancial instruments..............................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONFinancial reporting should be in a manner so that user or stakeholders can get a completeinformation which are required by them in order to take any decisions to invest their money inany financial instruments. Financial reporting presents an extracted summarised data from all theparts of financial statement. So that they can get their desired profit or returns on theirinvestment further stakeholders other than shareholders are also required ton get informationfrom the financial statements(Agoglia,Doupnik and Tsakumis,2011). Hence as there are anumber of users which frames their decisions as per the basis of figures and facts which arementioned there in financial statements so they are required to be credible and reliable. Presentedreport is providing evidence regarding whether to use fair market value or to utilize historicalvalue for the valuation of assets and during the transfer of any liability. The Internal AccountingStandard Board has framed certain standards which are mandatory to follow during thepreparation financial statements and the concepts which are mentioned in those standards relatedwith use of fair value is mentioned in this report.TASK 11.1 Valuation techniques as per the guidelines of IASB for financial reporting and IAS 13The International Accounting Standard Board (IASB) is a privately owned body whichregulates the concepts and principles which can be used by any entity during the formation orpreparation of financial statements. So as to give a better and clear information to its users. Forissuing regulatory laws and to provide information regarding the performance of statementpreparation it have issued a number of standards(Altamuro,and Beatty, 2010). The main work ofthis body is to frame IFRS in a way to provide credibility and reliability to its users.IFRS 13 Fair Value MeasurementThis standard has been launched by IASB on 12th May 2011 which deals in fair marketvaluation of assets and liabilities. This standard decides some criteria on the basis of which usercan make valuation of its assets and liabilities on fair market value. There is a difference betweenfair market value and historical cost as both of this are having some different elements. Fairmarket value as per this standard can be defined as that value which a person can get on the saleof any asset in open market. Which means fair value is that actual cost or value which an asset ofliability possesses on any particular date on which such sale or exchange has been done. On theother hand historical cost is that cost at which such assets was acquired in past. Historical can be1
considered irrelevant during making any decision as in this depreciation factor or diminishingvalue factor has been ignored. Hence because of this it can be said that the historical value cantbe considered as that value which an asset or liability can fetch if they gets exchanged in theopen market.As per this standard there may be some issues which an user can face while calculatingthe fair market value of any holding or possession(Armstrong, Guay and Weber, 2010). It maybe possible that there is no availability of an active market through which they can evaluate theirassets and liabilities in way which can provide them the accurate value at which their assets canbe get sold and their liabilities can be get exchanged.Techniques of measurement of fair valueThere are some techniques through which an entity can get an accurate value which theirassets are possessing at present. Measurement can be defined as a process for the determinationof a material amount at which the data or the elements of financial statements should berepresented. For example valuation of any fixed asset which is used by an entity during theproduction process such measurement techniques can give a value at which that fixed asset canbe shown in statement of changes in financial position. IASB Framework and its para 100provides a number of different techniques which can be get utilized for the valuation of currentand non current assets and liabilities(Barth and Landsman,2010). These are mentioned below : Historical Cost : Assets gets recorded at an amount which is either cash or cashequivalent which is paid to the supplier at the time of their acquisition. Liabilities arerecorded at that amount which an entity has get against any obligation.Current Cost: Sometimes assets are recorded at an amount at which the same asset canbe acquired during the current period or as on that date.Settlement or realisable value: It means that amount which the entity can get by theordinary disposal of available asset. Liabilities can also be get recorded in the books ofaccount at a value at which these can be get settled. Hence for getting the settlementamount total obligatory amount requires to be get reduced by the amount of discountwhich is available.Present Value: Assets can be valued at their present value by multiplying the appropriatediscounting factor with the future net cash inflow. As the time value of money is2

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