Non-Current Assets and Books of Accounts - Coursework Example

Accounting standards have been developed which aims towards highlighting the manner in which the non current tangible assets will be recorded and presented in the financial statements. The standard has been recognized for assets which are not held for investment property, acquisition cost, depreciation and other economic events which will help to record those transactions and its applicability to recording different transactions. This paper thereby looks to presents the assertion as it applies to non-current assets and the manner in which it has to be recorded in the books of accounts. On the forefront before moving into the recording and presentation of non-current assets it is imperative to understand the denomination of assets which falls under the purview of non-current assets. An asset will be classified as non-current only if it meets the following mentioned criteria The entity expects to use that particular asset for more than one year The entity expects economic benefits to flow in the future and that will contribute positively towards the growth of the business The entity can accurately and reliably find out the cost of the assets which has been acquired The risk for that particular assets have been properly passes on to the entity which has purchased the asset The transfer of risk is the main point when the entity which has purchased gets the right for the use, disposal and managing the assets and all the risk after that is to be borne by the entity (IFRS. 2013). The moment when the agreement is signed the assets gets transferred and it is the right of the entity to ensure that the assets are properly accounted for in the books of accounts. The entity needs to ensure that the non-current assets are recorded at acquisition cost which includes all the cost associated while procuring the assets like actual price, delivery cost, installation cost, assembly cost, repairs cost and so on. The entity has to ensure that the assets are carried over at historical cost and based on the prescribed accounting standards different depreciation are charged on different assets (IFRS 5, 2013). This helps to ensure that as long as the assets can be used it will be highlighted in the actual cost but simultaneously a depreciation account is also created which ensures that appropriate depreciation is charged to the assets. An important point to note here is that the assets need to be carried at historical cost so but at the same time it is important to ensure that the assets are at fair value. To deal with the discrepancy and differences it has been ensured that the entity prepares a depreciation account where the amount of depreciation is charged to the appropriate assets. This will help to ensure that the assets are carried both at historical cost and also at a fair value as it will help to bring forward the actual value of the assets (Accounting Principles. 2013). This will help the user of the financial statements to take proper decisions as the assets will be identified at correct cost. The overall validity and value of the financials will thereby maximize as it will bring forward the actual value of the assets and will ensure that the decisions based on it are appropriate. While looking to carry the different non-current assets at historical cost it has to be ensured that the assets provides an opportunity to generate revenues in the future and should have economic value. Carrying assets which will not help the business over a longer period of time should be avoided as carrying those is meaningless and doesn’t provides any value to the financials of the organization. This makes it important that assets which don’t have any material value should be written off completely and should not be highlighted in the financial statements. The financial statement especially the balance sheet is further looked by people as a valuation document because of the fact that the balance sheet shows items on a particular date. This ensures that the balance sheet is prepared on a particular date which thereby helps to highlight the value of the particular assets and liabilities on that day. This helps the users to understand the actual valuation of the assets and liabilities on a particular date and acts as a valuation document where all the different assets and liabilities are valued. Still, it is important to note that balance sheet is not a valuation document but instead it is a statement which highlights the value of the assets and liabilities on that particular date (Accounting Standard. 2004). This thereby helps the user of the financial statement to understand the manner in which different business decisions based on it is taken and helps to maximize and multiply the overall effectiveness through which the financial statement is prepared. This can also be looked through one more direction where highlighting the different non-current assets which don’t have any value will result in the balance sheet to be overburdened with assets which don’t have any value. This will result in having different assets in the financial statement having zero value. This is meaningless as it will have a negative impact and the decisions which are based on it will be incorrect. Since, balance sheet acts as a point where the organization communicates with the stakeholders regarding their performance and manner of working it becomes imperative that the financials look at bringing forward the true value of the assets and liabilities. This will ensure that the stakeholders are provided with information which will guide them to take their decisions and will have a positive impact on the overall manner in which business process is being carried out. The financial statement thereby has to ensure that the non-current assets are carried at historical cost and at the same time the valuation of the assets is correct so that correct financial figure is highlighted in the balance sheet. This will help the users to multiply their effectiveness in the use of financials and will provide a complete and true picture regarding the manner in which the financial statement highlights different values. The overall presentation and reporting of the financial statement would thereby largely improve and will ensure that the decisions which are taken based on it will be correct. The non-current assets which are carried at historical cost should be such that it contributes towards the economic value of the organization. This will help to ensure that the business is able to generate additional revenues from it in the future. Further, the process of apportioning depreciation will help to ensure that the assets are further carried at real value and will provide an important directive through which the business process will be able to multiply their effectiveness and will be able to generate additional revenues from the use of it. The balance sheet as a result will also help to signify the correct values and will provide an opportunity through which decision making improves and the users are able to garner maximum information. References Accounting Standard. 2004. Accounting Standards “Non Current Tangible Assets”. Official Gazette, 1-50 Accounting Principles. 2013. Accounting Principles of Financial Statement. Retrieved on Jan 22, 2013 from http://www.metso.com/corporation/ir_eng.nsf/WebWID/WTB-041109-2256F-AEF73?OpenDocument#.Ut4Z-fvhXIU IFRS. 2013. IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations. Retrieved on Jan 22, 2013 from http://www.iasplus.com/en/standards/ifrs/ifrs5 IFRS 5. 2013. Disposal of subsidiaries, businesses and non-current assets. Retrieved on Jan 22, 2013 from https://inform.pwc.com/inform2/show?action=applyInformContentTerritory&id=0922073503147609&tid=135 Read More