FINANACIAL ACCOUNTING

Financials Accounting

IAS 16 Property, Plant and Equipment

Introduction

The transformation of the U.S. economy requires an adjustment of the principles of the Accounting Act, including rules governing the rules of its conduct to the requirements of market economy. The provisions of the Act are gradually supplemented and improved, as evidenced by its subsequent amendments. The amendments to the Act outline the problem of harmonizing U.S. accounting to both the European Union, but also from the IAS (International Accounting Standards), which currently bears the name of International Financial Reporting Standards (IFRS). This paper focuses on the advantages and disadvantages over IAS 16 Property, plant and equipment.

Discussion

Advantages and Disadvantages

Historical Cost Convention

Historical cost (historical price) is one method of valuation of assets, whose aim is to show the economic situation of the company, expressed in value. "The price (cost) historical may be defined as the total amount of assets in cash or its equivalent, which the operator must pay for the acquisition of assets in order to be able to make control over them, in order to obtain future economic benefits. Total amount to be paid usually includes a number of elements, and its main element is the purchase price.

Historical price used in the valuation of assets is a very important advantage, since it is subject to verification as the transaction price, which is real and can be checked. Price, which is the result of the findings of the transaction between the buyer and the seller, is called the minimum value of the component balance of the buyer (assuming that uses the principle of prudence and it is impossible to acquire the same asset at a lower price). In some cases, the assumption that the minimum price is equivalent to the current price of an asset for the buyer and this is reflected to the principle of going concern (the company will work until it reaches a benefit from the acquired assets). This thesis is difficult to prove due to the fact that all the factors, which remain in the relationship together, generate a monetary value, which is then divided among the investors (www.cga-pdnet.org).

When tangible assets acquire component unit in exchange for a non-monetary assets or a combination of cash and non-monetary assets should recognize the asset initially at fair value unless:

The fair value of either component received and forwarded to the component can not be determined reliably, or

Exchange transaction is not ...