This website uses cookies to ensure you have the best experience. Learn more

Advanced Financial Accounting Essay

3413 words - 14 pages

Introduction
This assignment will be identifying and analysing the issues faced by accountants when valuing a company’s assets and liabilities in the Statement of Financial Position. Valuation of assets and liabilities is important because it can affect various stakeholders such as investors, shareholders and suppliers.
Hierarchy Valuation Methods Specified within IFRS 13
An International Financial Reporting Standard (IFRS) has been developed for accountants to allow them to value assets and liabilities fairly. The standard IFRS 13: Fair Value Measurement came into effect 1st January 2013 and its objectives are to define fair value, set out a framework to measure fair value and also requires accountants to disclose the level of the fair value measurement. It is important to understand that IFRS 13 does not tell you when to use fair value but how to use fair value. This standard creates consistency for businesses when valuing assets and allows accounts to be compared to previous years or competitors.

IFRS 13 applies to standards that permits or requires fair value measurements except for the following that sit outside the scope of the standard:

1. Share based payments (IFRS2)
2. Leases (IAS 17)
3. Net realisable value (IAS 2)
4. Value in use (IAS 36)

IFRS 13 provides accountants with three valuation techniques to help value their company’s assets or liabilities. The three techniques aim to maximize the observable inputs and minimize the unobservable inputs. The valuation techniques are as follows;

Market approach – This technique uses information from transactions of identical or comparable assets/liabilities that are taking place in a liquid market. For example if a company has a fleet of delivery vans they can value these vans as there is a market where delivery vans are openly traded.

Income approach – This valuation technique takes into account the future cash flows and discounts them to value an asset/liability. For example, owning an office building which is rented out to another company. The present value of the building is based on the discounted cash flow amounts.

Cost approach – The cost approach is used when you have an asset that has no market value but still needs to be valued. This technique uses current replacement cost which means how much it would cost a business to replace the asset if the asset ever needed to be replaced.

IFRS does not favour any of these valuation techniques but each technique will be more applicable to some assets. Any valuation of assets or liabilities will need to be backed up by the valuation hierarchy so stakeholders can identify the most reliable information.

There are three levels to the disclosure of the valuation hierarchy in IFRS 13. The first two levels, Level 1 and Level 2, are based on a mark to market approach which means there has to be an active market for there to be a valuation. Level 3 is mark to model and do not have an active markets and the valuation are based on risk-adjusted...

Find Another Essay On ADVANCED FINANCIAL ACCOUNTING

A History and Summary of Accounting

1589 words - 7 pages everyone. Eventually the metal coins started to be caste. In the 14th century, in Italy the accounting that is used today was established. Double entry accounting was introduced by 1300 AD. In 1494 Luca Pacioli, a monk wrote a book on mathematics which talked about the accounting they used, some of the work can still be identified by accountants now. The industrial revolution brought about many developments and companies needed a more advanced

Ethic of Financial Statement Essay

872 words - 4 pages , understandable and timely disclosure in document and report that the firm and its subsidiaries file. Against the financial code of ethics may also consider as violations of law, which may cause the firm and the owner to criminal or civil penalties. “The financial statements are management’s responsibility. The auditor’s responsibility is to express an opinion on the financial statements. Management is responsible for adopting sound accounting

International Business Financial & Management Accounting

6097 words - 24 pages technology (e.g., JIT)Advanced information technology (e.g., integrated systems such as SAP R/3, ABC-software packages, expert systems, Internet, Intranet, Electronic Data Interchange, Local/Wide Area Networks, etc.)Coercive pressuresFactors driving convergenceTransnational legislation (e.g., European Union)Transnational trade agreements (e.g., GATT/WTO, NAFTA, APEC, EU)Harmonization of the financial accounting legislationTransnationals

The History of Accounting

1141 words - 5 pages , accounting has made significant contributions over the past five and a half thousand years. The first samples of what we called “writing” were believed to be actual records of transactions from more than 5,000 years ago. Many scholars considered that accounting systems were in use which had counterparts for our modern ledgers and receipts. Even the ancient Egyptians had a far more sophisticated system of accounting because of their advanced

How accounting for goodwill relies on underlying assumptions: a historical approach

943 words - 4 pages testing in Malaysia: a compliance analysis. Australia: Macquarie University. Montgomery, R. (1913). Auditing: Theory and Practice. New York: Ronald Press Company. Paton, W. (1941). Advanced Accounting. New York: Mac Millan Company. Walker, G. (1953). Why Purchased Goodwill should be Amortized on a Systematic Basis. The Journal of Accountacy .

abcdfg

8692 words - 35 pages for students, lecturers and practitioners. Students and lecturers should find this a good textbook for undergraduate and postgraduate intermediate and advanced accounting and financial reporting courses. Users and preparers of financial reports will find the concepts and explanations useful in their daily work, and they can use the book as a guide in analysing, auditing and preparing their financial reports. Key Features n Latest coverage of

Area of Study Guidelines for Business Management and Economics

1396 words - 6 pages in-depth analysis of auditing procedures. The emphasis will be placed on various decision-making and judgment process involved in auditing. The idea is to become more proficient and professional in the international auditing environment and legal and social responsibilities. In Advanced Accounting I aim to apply financial accounting theory to problems and cases involving the recording of transaction, changes in ownership and liquidations

Changing Technology Due to Changing Manufacturing Environment

2157 words - 9 pages and ‘advanced’ accounting techniques, like ABC, JIT and TQM. Budgeting, variance analysis and come back on investment techniques can still be adopted by organizations, however new techniques are seemingly to assume larger connection. The traditional management accounting was meant to suggest neutral, objective and calculable financial info. These systems were expected to bring round light-weight the facts of cost accounting, to change the pursuit

Discussion into the impact of adoption of International Accounting Standards to the UK

1530 words - 6 pages Accounting with Finance (Hons)Advanced Financial Accounting Coursework'Discuss the impact of the adoption of international accounting standards in the UK'Most companies in today's world have to prepare some form of detailed record of its activities during the year. There are several users who require such detailed information, and therefore companies produce yearly accounts, showing items such as incomes, cash flows, and asset measurement. These

What is Cloud Computing?

1534 words - 7 pages paperwork necessary to make the changes. Automation helps transitions move more effectively within a business and reduces the amount of labor to upgrade the service. Another improved service is the many different advanced features of the cloud. As stated on the Financial Force website under benefits of cloud accounting is: “One example is a Multi-company feature. It will allow you to customize each organization as you please while maintaining the

Fund Balance Essay

510 words - 2 pages generating revenue with the help from the public.Fiduciary funds account for the assets that are held in a trustee capacity for external parties. All fiduciary funds use the economic resources measurement focus and accrual accounting for the timing of revenues and expense. The fiduciary funds are not included in government-wide financial statement because these assets are not used for the government. Examples of fiduciary funds are pension trust

Similar Essays

Financial Data Management Essay

1115 words - 4 pages information systems (AIS), from the manual double entry bookkeeping systems to today’s advanced accounting software systems. The authors cite technological innovation as the key element in the advancement of AIS for efficiency and timeliness of financial reporting. Badua and Watkins cite “in the late 20th century, advances in computing, data modeling, and telecommunications, had significant implications for accounting” (p. 77). Throughout the

Accounting Cycle Essay

1139 words - 5 pages In the general point of view, an accounting cycle refers to certain procedures that must be established by every business unit to provide the data to be reported on the financial statements. The accounting process consists of two interrelated parts: the recording phase and the summarizing phase. Although these phases vary in details depending on the nature of the business, the main purpose is just the same - to be able to provide an accurate

Accounting And Career Essay

652 words - 3 pages for accountants. Data is needful in accountants’ lives. Dealing with data is the first daily work for those accountants who work in the public or private firm. Data, such as assets, liabilities, stockholder’s equities, revenues, and expenses and so on, are the most basic elements of accounting. They are also the foundation of advanced research. Data is a good assistance for accountants. Accountants can obtain further information by analyzing the

The Effects Of Technology On The Accounting Field

1249 words - 5 pages things such as code of ethics, and search for files, or other documents needed to help get work done. The extranet is a safe network provided by the accounting business/ department for decision makers, client or outside business executives to access finished financial statements, and to be able to pass important documents back and forth. Cloud computing is just a way for accounting firms to save space on their hard drives, and makes the access of