Essays on Historical Cost

Issues of Implementing Fair Value Accounting in Emerging Economies

QUESTION 3

The fair value accounting has ensured accuracy in the operation of different organizations and business. The fair value valuation ensures that the organization practice a robust internal control process to make reasonable and consistent valuations an argument supported Bies’ (2012), Fair value accounting. These valuations should be subjected to independent review as required by the internal control process in order to ascertain that they reflect the underlying conditions of the market and they can’t be changed without having been approved as ascertained by He, Wong, and Young’s (2012), Challenges for Implementation of Fair Value Accounting ...

Question one

The benefit of the historical cost accounting is that the cost is known and can be easily checked in the invoice (Lal 696). In most cases the cost of the products is in the form of contracts transfer taxes, and payments. This perceived benefit relates to the hierarchy of the accounting qualities in that it is objective (Lal 696). This benefit ensures that the various reports of the financial position of an enterprise is accurate and can be verified easily by the lone documentary evidence. This historical cost accounting is related to the qualities that are mentioned in the ...

Broader set of Information to be Included in Traditional Financial Reporting

The Main Criticisms of Traditional Financial Reporting The very first criticism on traditional financial reporting is that the use of diverse accounting policies among different companies jeopardises the performance comparison between financial statements. In other words, traditional financial reporting causes businesses to use multiple accounting policies due to which accurate financial comparison becomes difficult. Another argument against traditional financial reporting is that despite performing independent examination of financial records and statements through internal and external audit, the financial records and statements may still contain material misstatements . There is a possibility that some material errors may go undetected during financial ...

Abstract

Historical cost accounting refers to the accounting method in which only the original costs of assets, liabilities, revenues or expenses are recognised. This means the method is silent as to the effects of depreciation, inflation, time value of money among other things. Much of the arguments for and against the historical cost accounting method can be divided into two, academic and practical reasons. The academic arguments resonate around issues of integrity and rationality while practical argument consider the fact that decision making uses accounting information and the overall need for accuracy in decision making. Its pros include the fact ...

Introduction

In an organization, the corporate level of management carries out the growth strategies of the organization. Growth strategies are employed to seek growth, sales, profit and market share or any other objectives the organization may have set. The growth strategies are expected to result to an increase in the organization value. Some of the growth strategies which may be implemented are vertical integration, horizontal integration, and diversification, take over, mergers and acquisition, strategic alliance and joint ventures. The strategies discussed leads to an increase in the market share of a firm. The strategies are also adopted to help the firm ...