![]() ![]() At the time when company sell its assets then it need to consider market value or historical value. In the business, deprival value cannot be accepting in respect to calculate the value of assets (Whittington, 2015). Therefore, at the time when lender buy it then it need to pay deprival value either it can wait for better buyer who can pay high amount. For instance, if house is sold with the marked value of 500000 but owner is required to paid 1 crore because of construction. ![]() At the time when anyone want to pay liability then it can be easily repaying through giving the assets with proper justification. In this one has to suffer from loss of assets. As it is considered as actual value that has to be pay who further purchase those assets. It does not undertake historical cost value or fair value (Pereira, Pinto and Martins, 2018). It means disbenefit which outcome is the outcome of the loss of a purchased assets. In this value of assets is measured in term of the loss and damage which is hold by assets holder. Generally, it is defined as a method of an assets evaluation which build on the basis of assumption. It is considered as actual value which should be paid by Deprival value method is known as the method in which asset value is measured. Some of the alternative methods which can be consider at the place of Historical cost are deprival value method and current cost method (Nykvist and Nilsson, 2015). However, it is considered as predominately objectives which can be broke in some circumstance. This method is based on past values and due to which reason, it not able to provide applicable data for the future (Ellul, Jotikasthira and Wang, 2015.). ![]() Lack of relevance as it is considered as important characterises of financial reporting which is identified in IASB’s framework. Inappropriately, every coin has two sides so there are some limitation of historical method which are as follows One of another significance benefit is that its reliability which is one of the main characteristics of financial reporting. For example, cheque counterfoil receipt invoice, etc Further it is also known as one of the most easier and cheaper method of valuation as compared to other methods (Grudinschi, Hallikas and Sintonen, 2015). In this method there is not area for manipulation and all the data is supported by independent documentary evidence. It is considered as a predominantly objective system because it keeps record of original cost of an item at the time of making purchase. One of the most understandable benefit of historical cost method is that it is objectivity (Lu, Guerrero and Vasquez, 2014). There are some advantages of this method. For example if an organisation purchase a new car at $25,000 then it will be considered as historical cost value even its price fall in future. This method assumes that inflation is not relevant and assets can be valued on the basis of purchase price. However, there are also some issues with historical method such as time value of inflation or money is not considered in it (Whittington, 2015). Due to this, reason consistency concept does not get disrupted. In historical cost method, historical cost values remain same as they do not change every year. However, these variations can disrupt the accounting concept and reliability. With the use of these methods company can easily report the same piece of property at various values in each year based on the market. Similar to this, there are other costing and valuation method such as replacement cost or current cost. This lead to make easier for the firm to put heading on the piece of property and perceive amount paid for it. It is a chosen method of valuing assets because it can be proven (Pereira, Pinto and Martins, 2018). Generally, it is defined as a concept in which assets required to be valued on the basis of purchase price or the money which is paid for the assets. In this, price of an assets on the balance sheet is constructed on its nominal or original cost once developed by the firm. Unit 3 Current measurement method is historical cost base method Regent College Level 4 Current measurement method is historical cost base methodĪ historical cost is a degree of value which is applied in accounting. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |