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Autor: anton • July 18, 2010 • 1,034 Words (5 Pages) • 656 Views
The Current Value Accounting
a. The term current values accounting or sometimes called the replacement
cost accounting refer to the replacing cost of the current capacity of
production as well as the existing inventory. This means that the managers
need the replacement for the capacity of the replacement equipment to what
are available in the market. This also suggest for the process of evaluation
that are necessary for the determination of the purposes. On the other hand,
it also ignores the historical prices and only focuses on the present values of
the assets (Stretton, H 1999, p. p. 383).
The current cost accounting had introduced UK in the year 1980 which
notified that it had failed and cease it to only be mandatory. The country's
standard setters were burnt badly by the totally failed of current cost ratio.
This incident due to firm's lack theoretical base lacks of conviction by the
users and preparers of financial statement, and the validity and adjustment
of the political nature and debate (Ramazanoglu and Holland, 2002, p. 33).
The reversion on the current cost accounting made adjustments when the
nationalized industries in UK adopted it which requires being non-mandatory
and the British Telecom had privatized. This implies that the investors
received the less information regarding the BT's maintaining capital. The
objections also rose in CCA that concerns the impracticability of the
embedded value which is the basis for the fixed asset. There are also
tremendous doubts that rose for the value of CCA in the small companies.
There are also dangerous effects on he planned disappearance and to the
profit figures for the familiar figure of historical cost accounting (Nobes,
1992, p. 157).
b. There are certain issues that focused by the IASB in the measurement of
the assets and liabilities. The organization is currently using the fair but the
other accounting standards prefer to use the current value, deprival or the
value of the business. Although the IASB used the fair value and it is easy to
understand as well as it is less complicated. There are certain problems that
the IASB is experiencing as the active market for some of the kinds of
business asset. In this manner, if there are no active markets, the estimation
need to be use which can be unreliable. This only anticipates the sales and
the profits that can never happen. This can also distort the trends for the
financial statements in market values in making difficult users in assessing
the performance of entity (lfp, 2007, p.42-43).
c. Since it had identified by the IASB and the FASB that the function of
company is the safety and custody of reporting for the resources of the
company as well as the efficient and profitable reports, it had been formed
their joint forces for the improvement of the financial reporting for the better
performance of the functions and the conventional system use of fair value
in accounting. Despite of the fact that the fair value disclosure can be
recognized, the requirements in the changes of the fair value must be
reported for the "gains" or the "losses" that appears that can rely in the
concept of Hicks in the theoretical ideal income. The concept of Hicks also
are discarded in giving way for the Fishers' theory for income which are the
two incomparable functions of financial reporting needs to be carried out
independently as well as without compromise. The traditional way of the
"hybrid" system with regards to the accrual accounting wherein the forward-
looking and backward-looking measures of the volume are mixed together
can be replaced into the system of segregation where they must be strictly
apart. This only signifies that the logical extension of the theory of Fisher
only suggests that the disclosure of the managers or the agents of the
return of investment needs to plan the delivery in their owners and principal.
This kind of information on decision-useful is ample for the efficient and
effective operation of the capital market as well as the removal of the
accounting incentives in short-termism (Rayman, 2007, pp. 211-225).
Disclose Financial Information
a. The company's needs to keeps its close tab on the process wherein they