历史成本.pptVIP

Obvious flaws of historical accounting method in times of inflation The validity of historic accounting rests on the assumption that the currency in which transactions are recorded remains stable, i.e. its purchasing power remains the same over a period of time. Another main point with regards to inflation is rise in prices for an asset. ▲ In addition effects of inflation may not be the same for all the companies in the market and historical cost accounts become almost unhelpful when comparing corporate performance. Improvement of historical cost method Revaluation of property, plant and equipment An entity should revalue freehold properties every three years. The revaluations must be made with sufficient regularity to ensure that the carrying value does not differ materially from market value in subsequent years. A surplus on revaluation would be recorded as a reserve movement, not as income. Derivative financial instruments Under IFRS and US GAAP derivative financial instruments are stated at fair value with movements recorded in the income statement. Financial reporting in hyperinflationary economies IFRS requires a separate method of accounting in currencies deemed to be hyperinflationary. ▲This might arise if cumulative inflation reaches or exceeds 100% over three years. An entity operating in a hyperinflationary economy:- Records a gain or loss on its net monetary position in its income statement. Records non-monetary items in the balance sheet by applying indexation to their historical cost. Management accounting techniques ▲measuring profit on sale of inventory by reference to its replacement cost. If inventory with a historical cost of $100 is sold for $115 when it costs $110 to replace it, the profit recorded would be $5 only based on replacement cost, not $15; charging economic rent for assets, particularly property. If a business uses a 20-year-old property which it owns, depreciation on a historical cost basis might be insig