Measurement of assets and liabilities Flashcards

1
Q

What are carrying amounts or book values

A

The dollar value assigned to assets and liabilities

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2
Q

Alternative measurement systems include

A
  • Historical cost
  • Current cost
  • Realisable Value
  • Present Value
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3
Q

Historical Cost

A

For an Asset: the cash or cash equivalents paid to acquire the asset

For a liability: the amount of proceeds received in exchange for the obligation

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4
Q

Current cost

A

“cost of replacing an asset or settling a liability “

For an Asset: the cash or cash equivalents that would have to be paid to replace the asset

For a liability: the un-discounted amount of cash or cash equivalents that would be required to settle the obligation

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5
Q

Realisable Value

A

“amount that an entity can expect to receive from disposal on an asset or settlement of a liability in the normal course of business “

For an asset: expected cash or cash equivalents from selling the asset

For a liability: the settlement value required to be paid in the normal course of business

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6
Q

Present Value

A

” Sum of the discounted cash flows associated with an item”

For an asset: the present discounted net cash flows associated with the asset

For a liability: the present discounted value of the future net cash flows that are expected to be required to settle the liabilities

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7
Q

Fair Value

A

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

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8
Q

Financial information must be

A

relevant and reliable so that it is useful for decision making

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