One of the most important issues in financial reporting is the measurement of assets and liabilities shown in a company’s statement of financial position (balance sheet). There are two main measurement approaches:
(1) Entry value
(2) Exit value
These approaches are put into practice using a variety of methods, of which the following measurement bases are widely used. Entry value can take the form of measurements based on historical cost and measurements based on replacement cost. Exit value can take the form of fair value measurements, measurements of net realizable value and measurements of value in use (discounted present value of future economic benefits).
For this assignment, you should choose a company that is listed on the Singapore Stock Exchange. The main business of your chosen company should be manufacturing, selling and/or distributing (for example, your company could be in the industrial, hotel, entertainment, food, retail or transportation sectors). Your company should not have its main business in the financial sector (such as banking, investment, insurance), because these companies have different types of asset from those of manufacturing, selling and distributing companies. Your company should publish its annual report and accounts in English and the most recent annual report and accounts should be accessible on the company’s website.
You are required to write an essay a MAXIMUM of 2,500 words (excluding any reference list and excluding any factual material about the company included in appendices), which covers the following two aspects:
(a) For each of the measurement bases identified above, explain how the measurement basis would be applied in practice, and discuss briefly the main strengths and weaknesses of each method.
(b) With respect to your chosen company, identify two classes of non-current (also known as fixed) asset and two classes of current asset shown on the most recently published annual consolidated (group) balance sheet (statement of financial position). For each of the four classes of asset, explain the measurement basis or bases used by the company for the class of asset, and discuss the advantages and disadvantages to the company of using the stated measurement bases.
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