Case Study Assignment Team A La Kisha Lang, Lucille Giron, Eric Ducote, Jerricka Leonard and Crystal Thomas ACC/497
Case Study Assignment Team A La Kisha Lang, Lucille Giron, Eric Ducote, Jerricka Leonard and Crystal Thomas ACC/497 PRG211
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Date Created: 11/11/15
Running head CASE STUDY ASSIGNMENT TEAM Case Study Assignment Team A La Kisha Lang Lucille Giron Eric Ducote J erricka Leonard and Crystal Thomas ACC497 September 22 2014 Rick Kwan CASE STUDY ASSIGNMENT TEAM 2 Case Study Assignment Team Case 35 International versus US Standards Under US GAAP property plant and equipment are reported at historical cost net of accumulated depreciation These assets are written down to fair value when it is determined that they have been impaired A number of other countries including Australia Brazil England Mexico and Singapore permit the revaluation of property plant and equipment to their current cost as of the balance sheet date The primary argument favoring revaluation is that the historical cost of assets purchased ten twenty or more years ago is not meaningful A primary argument against revaluation is the lack of objectivity in arriving at current cost estimates particularly for old assets that either will or cannot be replaced with similar assets or for which no comparable or similar assets are currently available for purchase Required a Discuss the qualitative concept of comparability In your opinion would the financial statements of companies operating in one of the foreign countries listed above be comparable to a US company s financial statements Explain The qualitative characteristics are crucial The qualitative characteristics are the qualities that make the financial statement to be useful The characteristics of comparability are important because it has the ability to compare the organization39s performance over a period of time The characteristics of comparability can use the information that is provided to compare performance with other organizations The United States GAAP property plant and equipment are reported at historical cost net cost of the accumulated depreciation other countries like Australia Brazil England Mexico and Singapore do not report at historical cost net of the accumulated CASE STUDY ASSIGNMENT TEAM 3 depreciation These countries report at the current cost as of the balance sheet date for the revaluation of property plant and equipment The differences could create potential problems when comparing the financial statements The size of the marketplace would be another reason why United States and foreign countries cannot be compared Schroeder 2011 b Discuss the concept of reliability In your opinion would the amounts reported by US companies for property plant and equipment be more or less reliable than the current cost amounts reported by companies in England Mexico or elsewhere In our opinion the amount reported by the US companies for property plant and equipment is more reliable then England and Mexico because they permit the revaluation of property plant and equipment to their current cost as of the balance sheet date Mean that when it comes time to do the balance sheet they change when they got it or make it seem that it have a long life than what it have When they know that the life of most plant and equipment do not last past twenty years and the value of property is all was changing Properties have the tendency to go up one year and then go way down the next This makes it hard to know what to put on the balance sheet in any one year without doing a give depreciation rate on it c Discuss the concept of relevance In your opinion would the amounts reported by US companies for property plant and equipment be more or less relevant than the current cost amounts reported by companies in England Mexico or elsewhere CASE STUDY ASSIGNMENT TEAM 4 The concept of relevance refers to the capacity of the accounting information to make a difference to the external users and decision makers that use the financial reports In my opinion the amounts reported by companies in the US regarding property plant and equipment PP amp E would be just as appropriate as the present expenditure amounts reported by entities in other countries like England and Mexico if these countries have adopted IAS 16 IAS 16 outlines the accounting treatment of most types of property plant and equipment IAS 16 states a company evaluates the plant property and equipment PP amp E under the general recognition principle all property plant and equipment PP amp E costs at the time they are incurred Those costs include costs incurred at the start to attain or create an item of property plant and equipment and costs incurred subsequently to include to replace part of or service an item The earlier edition of the IAS 16 enclosed two recognition principles An entity applied the second recognition principle to succeeding costs IAS 16 The amounts reported by US companies for property plant and equipment are more relevant than the amounts reported by companies in Australia Brazil and Singapore In these other countries a revaluation process is used when listing property plant and equipment Using a revaluation process is not correct because of assets that are outdated and may not have a suitable replacement A company could also have an asset that is not manufactured any longer and a revaluation of the cost is not relevant Recording an asset at historical cost and depreciating the cost over time is relevant This process allows a company to depreciate the useful life of an asset over time as this asset will decrease in efficiency and value over time Recording the historical cost net of depreciation allows the company to paint the best financial picture for investors creditors and management Revaluation would not allow the company to recognize the cost of CASE STUDY ASSIGNMENT TEAM 5 the useful life of the asset because it would be an upward adjustment It would not be accurate of relevant to add value to an old asset that may not be useful in the near future
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