Fair Value Measurement in Samsung Telecommunication Organisation - Essay Example

Fair value measurement in Samsung telecommunication organisation APPENDICES TOPIC PAGE Abstract........................................................................................................................................3 Introduction................................................................................................................................. 3 Non Current Assets..................................................................................................................... 4 a. Samsung Ever land.............................................................................................4 b. Hotels and Resorts.............................................................................................. 4 c. Samsung Medical Centre................................................................................... 5 Determinations of Fair values.................................................................................................... 5 Problems in measuring fair values ........................................................................................... 6 IASB’s approach and non asset Companies............................................................................. 8 Conclusion..................................................................................................................................... 8 Bibliography.................................................................................................................................10 Abstract Samsung is a mobile manufacturer whose name means three stars. These three stars stand for its size that is Big, its quality that is numerous and status, which is Powerful. It was founded by a Korean Le Byung-chul in the year 1938. It is the largest mobile phone marker and the second largest semi conductors’ manufacturers. The Company has the headquarters in Samsung Town in Seoul. It is one of the world’s best mobile phone manufacturers. Apart from phones, its other products are Computers, telecommunication networking equipment, digital television and liquid crystal displays among others. For the past decade the enterprise has broaden and captured the attention of most costumer’s worldwide. Its best tool for its knowledge and acceptance by many people is its operation in numerous and affiliated business worldwide all under the Samsung brand. This is one and the most advantage it has over other telecommunication enterprises. It is considered to be one of the few companies globally who have manage to attain almost the impossible goals. It has achieved this by going beyond advantage resources, global competition and the acceleration of the learning pace in an organisation. It has made significance and tremendous changes over a period of years to attain its status. This paper introduces a new record to show how a company can generate lasting outcomes through effective management approaches matching its core strategies. Introduction For along time in history, the historical cost has been used as a basis of measuring financial report in most of the organization. On the contrary, the most preferred financial reporting basis by the International Accounting Standard Board (IASB) is the Fair value. Most of the united nation countries have disagreed with Fare value. Instead they prefer the historical method. Fair value is believed to be a market based measurement. It is therefore a contrast of the historical cost which is an entity specific measurement. This paper therefore seek to discuss three major non current assets owned by Samsung Company, problems it faces in measuring the fare value of these assets and also to comment on the possibilities of fair value measurement for non current companies (Muller et al, 2002). Non current assets Though the organisation started as a small company. It has ventured into many affiliate and subsidiary businesses. This has made the company’s name to have widely spread globally. Some of its major and most significant non current assets are Samsung medical centre, Hotels and Resorts, Life insurance companies, Heavy industries, fire and marine insurance, Samsung Everland, Engineering, Electronics among others. All these are branded on one name ‘Samsung’. The company has made a great move in the stock exchange market through its assets. The three major assets include: a) Samsung Ever land This corporation was started in the year 1963.It offers service that enables its customers to engage in their daily businesses operations with ease. These services include building management, taking care of the environment, entertainment, food and beverages and even energy production. Apart from those, they also engage in Golf activities. Through this corporation, Samsung has ensured that its customers world wide have conducive environment for carrying out their businesses in each and every aspect of their lives (Hoff elder et al, 2014). b) Hotels and Resorts. Samsung has built a stream of hotels and resorts called Shilla Hotels and Resorts. This hotel is believed to be one of the luxurious globally. It was started by the founder of Samsung Company in the year 1979. The hotel has offered consolation and standard hospitality to the most important guests visiting the area. Apart from that it also accommodates state visits and hosts international events. In connection to that, the hotel also offers fitness facilities in liaison with the Korean five star hotels. With its duty free shop business it has managed to become the best distribution company in the whole world. Their main intention of starting this business was to offer the best hospitality world wide. This business has really earned them a lot of profit over the past years (Hoff elder et al, 2014). . c) Samsung medical centre Their main intension to serve their customers to their perfection, the Samsung Company decided to start a medical center in the year1994. Their main objective was to offer the best medical personnel, services and advance medical research institution. Above all, to become the best medical centre in the world. Apart from a hospital, the centre also has a cancer centre, special clinics and specialist centres. Through these centre, most of the complicated diseases have been cured. Researches for the incurable diseases are being carried out by the best medical practitioners ever known (Hoff elder et al, 2014). . Determination of fair value The evaluation of equipment, property and plants using the fair value measurement approach has enabled the Samsung Company to make a great move in its marketing. In doing so, they have opposed the use of historical cost for valuing property. This has proven historical cost as of no conceptual basis. They ensured they were reliable by being natural, verifiable and by having and believing in faith .For their assets to have the highest value in the market; Samsung Company has carried out the following steps and procedures to determine the fare value of their assets in the market. Identifying the market where their assets belong to. Having different and various assets, Samsung had to find the exact market for each asset. This enables them to have the appropriate market. Obtaining the current market of the asset by getting a quote from brokers dealing with the type of the different asset they have. Brokers are specialised in different markets and for different assets. Getting a quote enables them to know the exact market value of the asset. Acquiring quotes from more than one broker if the asset is a non commodity. This enables them to compare the values from various markets world wide. They finally use the information gathered above and their conclusions to determine their best fair market value for the asset in question. This prevents them from making wrong choices hence the business and the deal becomes a success (Bolt et al 2008). Problems faced in measuring fair value of assets. Many a times the company had to face several challenges in measuring the fare value of the above discussed assets. The challenges include: The company at times find it hard to fix fare value disclosures in the company’s financial statements. This majorly applies to the Samsung medical centre. Having several sectors under it, the medical centre finds it hard to incorporate these values within stipulated time since each sector has to produce a complete financial report of the sectors. Its plans, budget and strategies. To curb these, a team of experts have been appointed to ensure that the financial reports are availed in time. The Samsung Ever land faces the problem of selecting criteria to use when giving discount rates. Its sole Aim being to ensure that its customers have a conducive environment to do their businesses, giving them discount has been a great challenge to them. At times the discount is too much that they end up making loses while at times their customers incurs loses. When this happens, they loose customers and at times the product loose its market value. The company finds it hard to get relevant source having information on the inputs for estimating the agreements fair value. This has been a challenge for most of its subsidiary businesses. When a relevant source is not found, the company is forced to turn to other sources. If this happen, the accurate information may not be gotten. This in turn has forced the company to use the information at hand which may not bring out the clear picture. Finding the right brokers for their assets at times becomes a night mare. This has made it at times make the wrong choice hence get low or at times no profit. Apart from that, the broker may give wrong information. This has been a major problem not only to Samsung Company, but also to other large organizations. The inputs like discount rate for the obligation, the table of mortality and the return for projected rate has become a big problem when in appropriate assumptions are made about them. A long term research, plan and strategies are needed before they are carried out. Especially in the hotel and resort asset. If these are not done accordingly, the three may crumble bringing the company down with it. This in turn imposes the company to a great lose (Hitz, 2007). IASB’S approach and the non current assets companies This approach has really helped many companies in the market. I believe that with proper planning and total commitment to this approach can as well help the companies with non current assets to trade broadly and deeply in the market. This is only possible if the market forces are the one to determine the options but not the regulators. This will only therefore work if these companies allow their assets value to be purely determined by the market forces but not their wish and needs. In other words, the fare value of these assets is related to the net firm specific cost and relies on dept financing. I therefore support that fair value is applicable to non current assets company when the specific firm cost estimates prevents the use of fare value as a basis of valuation. With trial and determinations, all these companies can make it through in the best way possible( Barth et al, 1998). Conclusion As a matter of fact, Fair value was introduced to enable different companies acquire the knowledge on how to make fair measurements. Some companies more so in the United States for several years have taken it to have been implemented to change the values of assets and liabilities. This is not seen in the case of Samsung Company. It has taken the implementation of fare value as a positive way to move deeper and broader into the markets. This has enabled it to make a great move in the world’s history book as one of the most competitive organisation in the world market. Apart from that, Samsung has also emerged the best in selling its products and commodities. The small companies and other big ones that fear the fare value approach should therefore put it into practice or give it a trial to experience its advantages before blaming it. Every problem has a solution depending on individuals view. Even though Samsung Company experienced challenges in implementing the Fair value approach, it tried to acquire solutions for most of them. Through their hard work and determinations, they made it through and emerged the best telecommunication company world wide. Bibliography Ashbaugh & Olsson 2002. “An exploratory study of the valuation properties of cross-listed firms”. IAS and U.S. GAAP earnings and book values. Barth & Clinch 1998. “ Revalued financial, tangible, and intangible assets”: Association with share prices and non market based value estimates. Journal of Accounting Research Biondi, Y. 2011. “The pure logic of accounting”: A critique of the fair value revolution, Accounting, Economics, and Law. 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