Corporate assignment

Corporate assignment

Introduction

In economics and accounting, the term fair value is referred to the unbiased and logical approximation of likely market value of the asset, service or good. In accounting standards in various conditions various standards and requirements for estimating the fair value of assets, good pr services. However, there are various factors that aim for the estimation of fair value such as distribution costs, production cost, acquisition costs, replacement costs or cost of close substitute; real benefit at a defined level of development of productive social capability; and supply against demand (Berrington, 2011). There are various subjective factors that are addressed with objective factors and that includes; consideration of risk, return on capital and cost of that capital; and benefits that are perceived individually.

Discussion

In Australian Accounting Standard Board (AASB), the term fair value is defined as the price which will be received on selling of asset or amount which is paid for transferring liability via arrange transaction among participant of market at the date of arrangement. It is also defined as the exchange of asset or settlement of liability by certain amount among expert parties who are willing to transaction at arm's length. In accounting standards in various conditions various standards and requirements for estimating the fair value of assets, good pr services. However, there are various factors that aim for the estimation of fair value such as distribution costs, production cost, acquisition costs, replacement costs or cost of close substitute; real benefit at a defined level of development of productive social capability; and supply against demand. There are various subjective factors that are addressed with objective factors and that includes; consideration of risk, return on capital and cost of that capital; and benefits that are perceived individually (Berrington, 2011).

AASB 3

This standard is referred to business combination and the objective and aim of this standard is to enhance the significance, comparability and dependability of the information and data which is provided by reporting entity regarding business combination financial statements. It identifies and evaluates the acquired assets, assumed liabilities and other non controlling benefits for acquiree. It also identifies the goodwill and evaluates the values which resulted in the acquisition of business combination or gain from purchase bargain. And it also identifies the information that need to be disclosed that allows financial statement users to analyze the characteristics of the business combination and its financial impact (Bloom, 2012).

In determining the fair value of acquired asset there are following requirements for determining the fair value of assets:

The first requirement is regarding the assets having uncertain cash flows. It specifies that acquirer must not identify separate allowances for valuation because when asset is evaluated on the date of acquisition, fair value of the asset includes the impact of uncertainty regarding future values of cash flows. The acquirer need to understand the term and conditions of the assets that are categorized under operating leases such as patent or building. Another requirement of evaluating asset is not to consider the asset other ...