ACTG 4P11 Chapter Notes - Chapter 7: Effective Interest Rate, Ias 39, Financial Statement
Document Summary
Measurement approach is more decision useful (chapter 6) More relevant (since discounting future cash flows more information about future. Not very reliable since realistic conditions are uncertain: error and possible bias in estimating, management may change intended use. Ifrs 9: may value certain financial assets at value-in-use if firm"s business model is to hold the assets to generate future cash flows from interest and principal, controls management ability to change intended use. Ideally market value, but market incompleteness complicates the measurement. Reliability decreases as moving from level 1 3. Exit price measures opportunity cost of retaining asset/liability in firm (hence stewardship aspect) Amortized cost effective interest rate: assumes interest rate does not change so not a reliable method. Lower of cost or market - conservatism. Revaluation option for ppe option to value at fair value. Ceiling tests valued at recoverable amount if less than book value. Post-employment benefits valued at present value.
