Financial Reporting Theory and Practice Essay Example | Topics and Well Written Essays - 500 words

Financial Reporting Theory and Practice - Essay Example Since the reporting of a company's performance greatly depends on which accounting standard is utilized, the firm's health often depends on the policies in financial reporting. One of the most important issues in financial reporting is the valuation of the company's assets. Since a firm's asset is often measured by the amount of resources it holds in its asset account, companies should not overlook the valuation measures they use. This paper will examine the valuation of tangible, fixed assets as set by FRS and IAS. Valuation of fixed assets is laid out on FRS 15 entitled Tangible Fixed Asset and in IAS 16 with the heading Property Plant and Equipment. However, standard setters differ in their requirements regarding revaluation. FRS 15 states that "none specialized properties should be valued on the basis of the existing use value, with the addition of notional directly attributable acquisition costs where material (53a)." Meanwhile IAS 16 necessitates that asset be measured at the fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable.