Assets Flashcards
What are the 2 main bases for asset valuations?
Fair value and existing use value
Why must asset valuations be undertaken
Requirement under the Companies Act 2006. Firms must publish annual balance sheets indicating current and fixed assets
What accounting basis are public assets reported on
IFRS
What are the 2 main accounting standards and is there any difference?
IFRS and GAAP are the two main standards although the same general principles apply
What is the difference between fair value for GAAP and IFRS?
GAAP- the value of the asset in an arms length transaction in the open market
IFRS- Value of the asset if disposed of in an orderly manner
When is the valuation date for an asset?
The date of the report
When is a local authority or central government asset valued to EUV or fair value
Surplus asset: Fair value
EUV: Operational asset
What are charity assets valued to?
Assets valued to market value
How must land and buildings be valued?
Must be apportioned separately even when acquired as one entity
When would depreciation be factored into valuation?
Asset loses value over years due to factors such as planning use which may only be permitted for a number of years
What is a finance lease and what is an operating lease?
Finance lease: The lessee not only has operating control over the asset, but also some share of the economic risks and returns as if they owned it. The Interest will be shown on balance sheet and there is an option to buy it at the end of the lease.
Operating lease: A contract that permits the use of an asset but does not convey ownership rights of the asset
A finance lease transfers the risk of ownership to the individual without transferring legal ownership. Operating lease on the other hand, is an asset funding option for businesses that don’t want to take on the risk of selling the vehicle at the end of the lease
