Current Issue In Accounting (Accounting Theory) Essay

Current Issue In write up (Accounting Theory) - Essay ExampleAccounting is considerably a measurement tool since it assesses the hold dear and returns of the company in comparison to the approachs. The measurement of fair values (FV) of assets is inclusive of numerous aspects, for example, food market risk or reference work risk. According to Schroeder, Clark & Cathey (2010) the U.S GAAP standards differ in specificity of the valuation models. nearly corporations determine the fair value (FV) of their assets and liabilities as a net enumerate, and non them in their singularity. The Financial Accounting Standards Board (FASB) emphasizes that is imperative for corporations to associate their measurements on their business strategy approach (Schroeder, Clark & Cathey 2010). Part A criterion in Accounting Theory Measurement of financial statements encompasses the inclusion of accounting principles that will establish the unbent worth of the corporation of item (Schroeder, Clark & Cathey 2010). Some of the regulators of financial institutions argue that measurement of all financial instruments can generate predicaments in assessing the true value of the commodities. As such, measurement in accounting entails a collection of theories that conform to particular items but not a general formula. According to Christian and Musvoto (2011), there is no single approach to measurement theory. They vagabond that measurement theory in accounting can exist in two forms, which include way Theory of Measurement and Classical Theory of Measurement (Christian & Musvoto 2011). Representational measurement is what accounting standards are utilizing to in valuing the progress and items of an institution. Measurement models a. Historical cost Historical Cost entails recording the financial assets in the market value that was given to acquire it during the purchase period. The value of the asset is recorded inclusive of the liabilities that were considered during the exchange at their market values. The historical cost comprises of determination of the present value of the item after deducting the wear and tear amount of the commodity over the years in use. The original value of the asset will be depreciated utilize two approaches either the straight line manner or the reducing balance method (Walton & Aerts 2006). These depreciation adjustments will depend on the specification of the accounting principles applied by the company. The deductions on the assets of the institutions are do to the prior valuations and not the current values of the assets (Pratt 2011). The assets and liabilities held for trading functions is recorded under the market value method but the long-term financial products, for example, loans are measured under the historical cost approach. Advantages of Historical cost The asset is valued at the initial price and not at the market value thusly making it easier to ascertain the useful life of the asset. Initial costs are better at ascertaining the true value of the commodity and an individual can prudently determine the gains from it (Walton & Aerts 2006). In addition, historical cost is slow comprehensive than the alternative measurement models since it entails adjustments to the consideration value of the asset. Subsequently, it is not intricate to calculate the historical cost, foreign other models since most of the costs have been determined. Disadvantages According to Walton &