Cost model and revaluation model , Financial Econometrics

Topic

AASB 116 Property, Plant and Equipment allows entities to choose between the cost model and revaluation model for measuring and accounting for non-current assets subsequent to the initial recognition. This assignment requires students to analyse the effects of various requirements of AASB 116 on the relevance and reliability of financial reports.

Requirement 1 Maximum 1000words

(a) Briefly outline the factors likely to influence an entity in its choice between the revaluation model and cost model for measuring and accounting for non-current assets.

(b) Discuss AASB 116's rationale for offering entities a choice in measurement models, and analyse the pros and cons of this choice in terms of its potential effects on the relevance and reliability of financial reports.

Requirement 2 Maximum 1000 words

For firms that choose to measure non-current assets using the revaluation model, AASB 116 requires that fair values should be applied to items of property, plant and equipment on a class-by-class basis.

However, AASB 116 requires that accounting for revaluation increments and decrements are done on an individual or item-by-item basis within a class of assets. This inconsistency has been the subject of some debate.

(a) Briefly outline the issues in the debate between accounting practitioners and standard setters regarding the above-mentioned inconsistency about the measurement and accounting for revaluation increments and decrements under the revaluation model.

(b) What effects, if any, could accounting for revaluation increments and decrements on a classby- classbasis (rather than item-by-item basis as is required by AASB116) have on the relevance and reliability of financial reports? For each effect stated, provide reasons to justify your viewpoints.

Requirement 3 Maximum 500 words

Following Australia's adoption of IAS 16 that required firms to keep fair values continuously current, a study by Ernst & Young (2002) found that 40 % of firms surveyed reported a change in the measurement basis for one or more classes of assets. All firms that reported a change switched their measurement basis from fair value basis to cost basis, with none of the firms reporting a change from cost basis to a fair value basis.

(a) Briefly analyse factors that in your view explain the low adoption of the revaluation model for measurement by entities. Discuss (i) changes in AASB 116 that have been made since the Ernst and Young (2002) study and (ii) additional changes that could be made to increase the level of adoption of the revaluation model by entities.

Posted Date: 2/21/2013 2:24:14 AM | Location : United States







Related Discussions:- Cost model and revaluation model , Assignment Help, Ask Question on Cost model and revaluation model , Get Answer, Expert's Help, Cost model and revaluation model Discussions

Write discussion on Cost model and revaluation model
Your posts are moderated
Related Questions
Remedies for overtrading Short-term solutions • Speeding up collection from customers. • Slowing down payment to suppliers. • Maintaining lower inventory levels. Lo

Consider a recent merger between two major corporations. Describe the terms of the merger (cash or stock, premium, changes in management / directors, etc.). Explain the motivation

Question 1: (a) Analyse the impact of boom and bust in the economy on business activities? (b) What measures can policy makers use to promote economic expansion? Ques

An investment will require a $1.0 million cash outlay.  It will generate perpetual net cash inflows of $115,000 a year. Investors could earn 9 percent elsewhere by taking the same

Ask Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future earning will be Rs. 25. There is a belief that she may fall ill with probability of

Q. Show example on aggressive working capital policy? With an aggressive working capital policy, a company would hold minimal levels of inventories in order to minimise costs.

Introduction - Overview of the business idea. A clear outline of what you intend to present and why you are presenting it in your chosen method or style Business Plan A clear

analysis of bond rate parity among india and usa of last 10-15 years

How can economies of scale be a characteristics that makes for a good industry (please be specific) and what industry (besides automobiles) do you consider to be a "good industry"

If an investment is expected to return of 5 percent in the future, a $53,000 investment will grow to how much in 22 years?