Corporate Accounting Assignment

Corporate Accounting Assignment

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to the analysis of two accounting model. Valuation of assets refers to the procedure of examining the value (worth) of the company. The asset valuation is usually carries out before the sale of asset or buying insurance for an asset.

The method of asset valuation includes not only subjective measurement but also consist of objective measurement. For instance, a particular brand name is not valuated in the financial statements by means of any number or any other quantitative measure, this phenomenon is subjective, whereas the net profit and income is an objective measurement relating to data of income and expenses. The methods that are used most commonly for the determination of asset's value consist of comparing the primary asset with an asset of a similar nature to evaluate its cash flow ability. Replacement cost, acquisition cost and deprival value are also methods of asset valuation.

In this paper, the author will choose either the Cost Model or the Revaluation Model for valuation of an entire class of assets. As a part of the analysis, the author will be explaining the features of the two options, comparing these and coming up with recommendations for adoption of one of these models for subsequent recognition of plant and machinery, and land & buildings.

Discussion

The financial statement contains information that can be used to calculate the worth (value) of company's assets. Generally, the information is also utilized to assess the management's performance in its stewardship function. For the purpose of measuring the assets, IFRS details two different valuation models. The company can decide freely, whether to measure the worth or value of their assets through cost model or revaluation model. This activity is usually executed to present the required information in the balance sheet (Choi, 2003).

Under the cost model, the accounting of the fixed assets is done by incorporating the acquisition cost adjusted for accumulated depreciation and accumulated impairment loss. Whereas under the revaluation model, the value of the assets is calculated by taking in to account the fair value at each balance sheet date, it is required that the amount presented in the balance sheet should equal its fair value at the time it is presented in the balance sheet (Rana, 2010). When it comes to calculating the value of Property, Plant and Equipment, it is recommended to choose the revaluation model only if the fair value of Property, Plant and Equipment is reliable and accurate. There are supplementary constraints in case of items of intangible asset. It is recommended to use revaluation model only if there is existence of the active market for the asset. It is not often the case that active market exists for intangible assets. Hence, the intangible should not be measured via revaluation model (Paton, 2010). A corporation might decide to make use of both the models for two different natures of ...