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Pip S.
Pip S.
Paddington, QLD
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What is the primary measure used for asset valuation on the statement of financial​ position? What is the source of this measure and justification for its​ use?

5 months ago

Responses

Hi Pip,
I’m not an accountant but I believe that “written down value” or “book value” which is the acquisition cost less accumulated depreciation is the most commonly used
It should represent its potential value if sold in a normal operating market

Hi Pip,

there are a few different definitions and reasoning's out there, but in terms of Accounting Standards, the definition of Fair Value goes on about the amount which would be realised in an orderly transaction between market participants on the assumption that they each act in their own best interests. The document you probably want to refer to is the Accounting Standard for Fair Value Measurement (AASB 13).......unless this has been superseded by something more complex recently.

https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf

or to break it down a bit: the price which would be agreed on with a willing buyer and a willing seller in an open market.

For Public Companies, they have to comply with Accounting Standards, the idea being that anyone can rely on the financial statements as being accurate

For most Mum& Dad businesses, the accounting standards dont apply, and Generally Accepted Accounting Principals (GAAP) generally get used.......which for the most part mean that the items on the balance sheet are reported as Cost less Accumulated Depreciation....or Book Value. Which is unlikely to be Market Value.

hope that helps.......without knowing the context of your question, its difficult to give you a more specific answer..

cheers

BC

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