The Value of the Gross Domestic Product - Case Study Example

1.GDP The Gross Domestic Product (GDP) is one of the main indicators employed to appraise the health of a country economy . It depicts the entire value of dollar of the entire goods as well as services generated over a specific time.GDP are expressed as a comparison to the preceding quarter. Appraising the g GDP is intricate but the basic working may be executed in the following approach; by totaling each earned income or by summing up everybody’s spending. 2.Par Value This is the face value of the bond. Par value for a share implies the value of stock appraised in the corporate charter. Par value is significant for a fixed income instrument since it establishes its maturity worth and also the value of dollar of coupon payment. Shares normally depict no value or are very low. the market price of the bond might be superior or below the par value on the basis of factors like the level of interest rates and the credit position of the bond. 3. yes I agree that lack of common legal framework is a weakness of the concept of common international accounting standards since, the employment of superior accounting standards across the globe depict a potential to enhance the comparability and accountability of financial information as well as minimize cost of preparing the financial statement .where the accounting g standards is applied thoroughly as well as consistently, the participant in the capital market will have superior quality information as well as may make improved verdict (Altman, 1983). As a result, market allort finance effectively as well as firms may attain lower cost of capital. Financial reporting disclosure prerequisites and practices have as well had to act in response to these transformations by changing from just providing breaks of line items on the face of the financial statements to providing more comprehensive principles, together with disclosures of hypothesis, models, substitute’s ascertainment bases and sources of assessment indecision, amongst others. Disclosures have turn out to be the matching item in the calculus of how to offer trustworthy, important informational decision. Every company are mandated by the Australian accounting standard board (AASB) as well as the international financial reporting standard(IFRS) to prepare its annual or quarterly report in conformity with the laid down accounting disclosure principles. The company financial; statement should be prepared and must portray the business as a going concern (Bhattacharyya, 2006).The reason for this is that, the financiers of the company are interested with the company’s performance and are majorly concerned with returns inform of profit the company made over the last financial year since, the shareholders had invested some funds inform of equity capital in the company .In this regard, shareholders would be keen on the financial report of the company and places reliance on the information provided by the reporting in concluding on the financial situation of the company. 4.Letter by chairman of ASB a form of lobbying A. This is because the letter is made secret and addressed to the European security and market Authority in order to influence their decision and to change the accounting standard of Greek to be in conformity of the concept of common international accounting standards with their identity being disclosed to the public. B. Yes the lobby by the chairman of IASB depicts some weakness of the enforcement of IAS since, by the look things, the IASB are enable to enforce the IAS globally and consequently opting to lobe thought the authority (Hennie van Greuning, 2001). c. The reason for keeping the letter secret is to ensure that the IAS is enforced by Greece easily without any resistance to change from the Greece as well as the weakness by IASB forces it to enforce the IAS via the Authority which it believe will ensure faster enforcement and compliance of the accounting standards much faster unlike enforcement by the IASB. 5.Doing so will get rid or minimize drastically the assessment or recognition of irregularity (Accounting mismatch) which may otherwise exist from appraising an asset or liability or recognizing the gains or losses on them on diverse approach or, the liability is part of financial liability or asset that is controlled and its performance is appraised on the fair value approach in compliance with a documented risk con troll or venture plans as well as information concerning the group is provided internally on the approach to the company’s major control personnel. 6. Theory explains this This is the theory of recognition and measurement of accounting asset and liabilities (IFRS 9) since, the standard entails the needs for recognition as well as appraisal, impairment, derecogonition of accounting asset and liabilities. This theory supplants all the preceding as well as is a must efficiently for periods starting from 1st January 2018 with early adoption allowed. IFRS 9 doesn’t reinstate the needs for portfolio fair value hedge accounting for interest rate risk because the stage of the project is different from the IFRS 9 owing to the longer term nature of the macro hedging project that is at present at conversion stage. Goodwill is an example of intangible asset AASB 138 Para 48 deals with the recognition of internally generated goodwill and it clearly states that internally generated goodwill must not be recognized as an asset because it is not separable and it does not arise from contractual or other legal rights. Under section 334 of the Corporations Act 20011goodwill is generally recorded only if it is acquired as part of a business or professional practice purchase. Consequently goodwill can be recognized only when it is acquired as part of a business combination and measured in accordance with AASB3 business combination but internally generated goodwill is not recognized as an intangible asset. Moreover purchased goodwill can be measured more objectively on the basis of the amount paid for it than internally generated goodwill, which is not capable of being reliably measured. So goodwill can be disclosed as an intangible asset in your balance sheet only when you go on business combination. Alternatively, Paragraph 58 of AASB138 states that the development phase of internal project in an entity can only be identified as an intangible asset and can 4.1 Intangible asset According to IAS 38, intangible asset delineate the accounting needs for intangible asset that are Non-monetary asset devoid of physical substance as well as either being distinct or consequential from contractual right. Intangible asset complying with the relevant standards are primarily appraised on a systematic approach over their useful live unless the asset depict an indefinite life which is not amortized. Accounting for intangible asset was revised in the year 2004 and applies to intangible asset purchased in business combination as from 31st march 2004. Nature of intangible asset Intangible asset depict the two main traits They are non financial instrument as well as they lack physical existence. 2. Measuring intangible asset There are basically four approaches to measuring the intangible asset/they are as follows. Direct Intellectual Capital methods (DIC). This approach approximates the dollar value of intangible asset by ascertaining the numerous constituents. Once the constituents are identified, they may be directly appraised, either singly or as a total coefficient. Market Capitalization Methods (MCM) This approach works out the difference between the market capitalization of the company and the stakeholder’s equity as the worth of its intellectual capital or intangible asset. Return on Assets methods (ROA) Under this approach, the average pre tax profit of a firm for a specific period is divided by the average tangible asset. The outcome is return on asset which is then compared with its industrial average. The dissimilarity is multiplied by the firm’s average tangible asset to work out average annual earnings from the intangible asset. Dividing the above average earning by the firm’s average cost of capital would lead to an approximate of the value of intangible assts. Scorecard Methods (SC) Under this approach of valuing intangible asset, numerous constituent intangible assets are identified as well as indicators are created and accounted for in scorecard. SC approach is same to DIS approach only that no approximate is made in value of dollars of the intangible asset. The approach provides diverse benefit. The approach offers dollar valuation such as the return on asset is important in appraising the worth of a merger acquisition situation. The benefit of DIS and SC approach is that they may create a more detailed overview of a firm’s health unlike financial metrics and might be easily applied at whichever level of the firm, 3. Difficulties in measuring and intangible Asset Expense on intangible asset consequential from new technologies as well as branding is hard to measure as well as quantify. Intangible asset always been deemed risky asset. Accounting defines an asset economic resource with measurable anticipated service possible. Nevertheless, it is more intricate to appraise the anticipated service probables of intangible asset unlike the advantages accruing from other asset like investment in property, plant and equipment. As a result, with less exemptions, accounting standards commands that an expensing of entire internally generated intangibles. Present economy nevertheless, intangible asset like the intellectual capital frequently create value. The accounting expertise argues the conceptual issues involved in the recognition as well as appraisal to the capitalization of intangibles. Of specific significance, is the appraisal of the cost of asset that is being amortized as well as the employment of anticipated present value. Many of the measure of intangible asset are subjective . They are frequently on the basis of some relative latest management tool such as the competency matrix that provides information necessary. There is no time for collecting and finding the skills required for assessment and time for design the subjective assessments. The resource sued on development of data collection approach as well as the deficiency of subjective assessments that might permit focusing on enhancement . Non-financial assets are appraised for impairment when occasion or alteration points out that the carrying amount might not be realized. An impairment loss is documented for the sum by which the asset’s carrying total surpasses its realizable value. The recoverable value is the higher of an asset’s fair value minus outlay to trade and worth in use. For the reason of evaluating impairment, assets are clustered at the lowest intensity for which there are independently identifiable flows .Other Non-financial assets instead of goodwill are appraised at the closing financial reporting time for probable reverse of the impairment loss. Reference list accounting, I.a.A.p.c.t.l., 2015. Financial Accounting Standard Board. Altman, E.I., 1983. Corporate Financial Distress: A Complete Guide to. - Page 101. Arnold, G., 2005. Corporate financial management. Financial Times/Prentice Hall Lt. Bhattacharyya, A.K., 2006. Financial Accounting For Business Managers 3Rd Ed. Fernando, A.C., 2009. Corporate Governance: Principles, Policies and Practices. Hennie van Greuning, ‎.K., 2001. International Accounting Standards. Jay Rich, ‎.J.‎.M., 2013. Cornerstones of Financial Accounting - Page 392. Opperman, 2009. Accounting Standards - Page 585. Peter Holgate, ‎.B., 2009. Accounting Principles for Non-Executive Directors. R. Charles Moyer, ‎.M.‎.R., 2011. Contemporary Financial Management -. Robert W. Hankins, J.J.B., 2004. Management Accounting for Health Care Organizations: Tools and Techniques for Decision Support pg 286-312. Jones & Bartlett Learning. Subramani, R.V., 2011. Accounting for Investments, Equities, Futures and Options. Tong, P.T.L., 2013. Consolidated Financial Statements, International Edition. Read More