We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Choosing Cost or Fair Value on Adoption of IFRS Essay Sample

essay
The whole doc is available only for registered users OPEN DOC

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Choosing Cost or Fair Value on Adoption of IFRS Essay Sample

Description:A U.K. real estate firm, required to adopt international accounting standards (IAS) by 2005, must change the reporting of its primary asset (investment property) from the revaluation model under U.K. GAAP to either the cost or fair-value model under IAS. This would have a number of effects on European investment property firms, including Land Securities.

Learning Objective:To allow students to compare both the mechanics and relative merits of three models of accounting for long-lived assets (cost, revaluation, and fair value) and gain exposure to IFRS.

Case Questions:

1. Assume there are three separate real estate companies: US Realty (which applies the cost model), UK Realty (which applies the revaluation model), and International Realty (which applies the fair value model). Assume also that on December 31, 2003, each company pays £1,000 cash to obtain investment property comprising land with negligible value and an office building worth £1,000. The building has a 10-year useful life, has no residual value, and is expected to provide a constant stream of economic benefits over time.

What is the accounting entry for each company for the following four scenarios:

(a) on December 31, 2003, at acquisition
(b) on December 31, 2004, assuming the investment property fair value is
£1,300 (c) on December 31, 2005, assuming the investment property fair value is £1,100 (d) on December 31, 2006, assuming the investment property fair value is £500

Using the above illustrations, as well as Exhibit 11, as references, what financial analysis challenges arise as a result of these differing accounting models?

2. Which model (cost, revaluation, or fair value) provides the most relevant information? Explain.

3. Which model provides the most reliable information? Explain.

Required: Prepare a response to the above questions in Microsoft Word. Bring two copies of your document to class on the due date. One copy will be turned in at the beginning of class to be graded. Use the other copy to reference during the in-class discussion of the case.

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member