The Business School BUACC2603 – Corporate Accounting Semester 1, 2013 RESEARCH ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 1500 words Examine the requirements for measuring assets at...

Introduction
In this assignment we will review three major accounting standards and discuss
equirements for measuring assets at fair value in these standards. Following are the standards
which are subject matter of discussion in this assignment:-
1) IAS3/AASB 3 Business Combinations
2) IAS116/AASB116 Property, plant and equipment
3) IAS138/AASB138 Intangible assets
IAS 3/AASB 3 (Business combination) – This standard helps reporting entities in
improving the reliability, comparability and relevance of the information provided by them in
their financial statements regarding the business combination and its affects. This standard
consists of the provisions which underline the requirements and principles that must be followed
y the acquirer to consolidate its accounts with subsidiary. Few of the requirements and
principles are as follows:-
 Provision for recognizing and measuring goodwill arose due to business
combination or gain arose from bargain purchase.
 Provision explaining what all information must be disclosed to the shareholders
and other stakeholders which will help them in evaluating the effects of combination on financial
statements.
 Provisions explaining the method of identifying assets acquired, assuming
liabilities and computing non-controlling interest in the acquirer.
IAS 116/AASB116 (Property, Plant and equipment) – This accounting standard is issued
to help entities in presenting its property, plant and equipment in such a manner that shareholders
and other stake holders can easily fetch the information about additions made to these assets,
depreciation charged on these assets, Impairment loss adjustment (if any) etc. This standard lists
down the provision which helps in making reporting of these assets more transparent and
comparable with the assets of other entities operating in the same industry.
IAS138/AASB138 (Intangible assets) – This standard lists down the provisions which
prescribes the accounting treatment for intangible assets which were not dealt specifically in any
other standard talking about the assets. This standard lists down the criteria which must be meet
in order to recognize an intangible asset in the balance sheet, this standard also specifies how to
measure the ca
ying amount of intangible assets and what all disclosures must be provided
about these intangible assets in financial statements.
Determination of fair value
Fair value is a concept in which financial statements are prepared on the basis of fair
value of assets, liabilities and owner’s equity. According to IASB fair value is “The amount for
which an asset could be exchanged, a liability settled, or an equity instrument granted could be
exchanged between knowledgeable, willing parties in an arm’s length transaction”.
It is mandatory for companies to represent assets in the balance sheet at fair value; earlier
companies report assets at historical cost which is the amount at which companies have acquired
their assets. Historical method of accounting ignores the importance of the fair value and reports
all the assets on their acquisition price. Under historical method fair value is only considered
when an asset is being sold and that’s to fair market value not fair value.
According to financial accounting standard board fair value method of accounting is the
most appropriate method of accounting in which the transparency level is very high. Fair value
method of accounting provides investors the most useful information about the company. The
only limitation which exists in case of fair value accounting is that fair value is based on the
number of factors which can result in range of prices and it is difficult to choose any one.
Under AASB...