What is age, aged, ageing or aging analysis?
Age analysis is simply a time-based analysis with reference to due date to determine either how much time is left until due date or how much time has passed since due date. Most of the time age or aged or ageing analysis refers to the second type of analysis i.e. how much time has passed […]
What is work in process or work in progress inventory?
Work in process inventory is such asset that is still in the process of completion and not yet ready to be categorised as finished goods.In a manufacturing concern raw materials are converted to finished goods by applying labour and overheads (thus the main reason why labour and overheads cost collectively called conversion cost). However, it […]
What is the difference between Audit engagement and Assurance engagement?
In few words, all audit engagements are assurance engagements but not all assurance engagements are audit engagements. Audit engagement is one type of assurance engagement that provides reasonable assurance. Assurance engagements can be reasonable assurance engagements, limited assurance engagements or other assurance engagements. Other assurance engagements are such assurance engagements that are other than audit […]
What is the difference between a Fair presentation framework and a Compliance framework?
Financial statements are prepared to fulfill information needs of its users. In order to cater the needs at best a certain financial reporting framework is used considering the jurisdiction in which the entity and/or its users exist. For example two of the popular financial reporting framework are IFRSs and US GAAPs. However, talking about the […]
How to account for change in residual value of fixed asset?
International Accounting Standard (IAS) 16 recognizes that residual value of asset may increase or decrease as a result of revaluations or future assessments of non-current asset. IAS 16 recognizes such change as a change in accounting estimate i.e. adjustment will be prospective in nature. There is no need to adjust for previously recorded depreciation charge […]
What is meant by deviation from controls?
Simply put; an instance or activity that did not occur as per expectations is considered as deviation. For an activity it is not necessary that it must occur as per expectations but also non-occurrence can be considered as deviation. In short, any thing that given rise to conflict between expectation and what actually happened is […]
What is Depreciated replacement cost?
Depreciated replacement cost is an optimised form of replacement cost method to make the estimate more realistic by adding the aspect of depreciation to a simple replacement cost concept for valuation purposes. Replacement cost is simply defined as the cost that entity has to bear in order to replace the asset with such resource that […]
How fixed assets are revalued if fair value cannot be determined using market value?
IAS 16 Property, Plant and Equipment (IAS 16) recognizes the fact that fair value of every asset may not be determined using market value basis. Although it is recommended and hardly the case where market information does not help but still exceptions exist. IAS 16 recognises such assets specialized assets for which fair value cannot […]
What is Income approach to fixed asset revaluation?
After initial recognition at cost if the carrying value of an item (of property, plant and equipment) is significantly different from the value measured on fair value basis then revaluation of asset is required. The reason is if asset is still carried at old value financial statements might give distorted view of assets. Assets are […]
What is Matching principle in accounting?
Accounting principle that requires costs to be recognized after matching with the revenues earned associated with such costs i.e. the amount of costs recognized must be on equal footings with the revenues recognized. In other words costs shall be recognized at the rate at which benefits are rendered or revenue/income is earned by the entity. […]
