The paper "Measurement of the Constituent of the Financial Statement" is an outstanding example of a finance and accounting assignment. The framework, therefore, is concerned with the general purpose financial statement entailing the comprehensive financial statement. They are prepared as well as presented every year. Numerous corporations prepare their annual report by management that appraises as well as explains the key features of the corporation’ s financial situation as well as the financial position and its challenges it encounters. They as well provide the sustainability compliance which ecological factors are important as well as when workers are considered as a significant user group. Measurement of the constituent of the financial statement The measurement is the progression of establishing the monetary value at which the constituent of the financial statement is to be realized as well as accounted for in the statement of financial position as well as the income statement (Barry J.
Epstein, 2009). This entails the selection of the specific basis of measurement. Some of the diverse measurement basis used in diverse magnitude and varying combination in the financial statement are discussed in details below. A). Historical cost. Under this approach, the asset is accounted for at the amount of cash paid or the fair value of the asset that needs to be paid for at the date of acquisition.
The liabilities are accounted for at the value of proceeds acknowledged in exchange for obligation at the value of cash anticipated to be paid to guarantee the liability in the usual course of trading. (b) Current cost. Under this approach, assets are accounted for at the value of the cash that may be paid where a similar asset was bought presently.
The liabilities are accounted for at the undiscounted value of the cash that may be mandatory to settle the obligation at present. (c) Realizable (settlement) value. In this method, assets are accounted for at the value of the cash that may presently be accessible by disposing of the asset in standard disposal. The liabilities are accounted for at their settlement worth, that is, the undiscounted value of cash anticipated to be paid to guarantee the liabilities in the standard course of trading. D. Present value Under this approach, the asset is accounted for at present discounted value of the anticipated net cash inflows that item is anticipated to create in the ordinary course of trading.
The liabilities are accounted for at present discounted value of the anticipated net cash outflow that is anticipated to be mandatory to settle the debt in the ordinary course of doing business The measurement that is frequently assumed by corporations in preparing the comprehensive annual reports is the historical cost basis. This is normally combined with other measurements for instance; inventories are normally accounted at lower of cost and net realizable value.
Some corporation employees the current cost basis as a retort to the incapacity of the historical cost basis in order to deal with the impact of changing prices of the non-monetary item (Hennie van Greening, 2001).
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