Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Cost model (IAS 16)
- This topic has 4 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
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- January 8, 2017 at 5:54 pm #365657
Hi,
I would like to ask a question related to revaluation models mentioned in IAS 16.
– If a company decides to use “cost model” to revaluate an asset why has to disclose the fair value of it anyway? Since they can’t choose to revaluate it by fair value model, therefore no reliable figures represent the fair value of the asset.Thank you.
January 8, 2017 at 6:15 pm #365659Is it the fair value of initial measurement that needs to disclose?
January 9, 2017 at 8:36 am #365744There’s no such verb as “to revaluate” so, for the benefit of you, me and any others that read this thread, I’m going to replicate it here, and then answer it
“I would like to ask a question related to revaluation models mentioned in IAS 16.
– If a company decides to use “cost model” to value an asset why does the company have to disclose the fair value of it anyway? Since they can’t choose (haven’t chosen?) to value it by (using the) fair value model, therefore no reliable figures represent the fair value of the asset.”I think that that is what you mean but now I have issues with it!
1) “… why does the company have to disclose the fair value of it anyway?”
There’s nothing mandatory about HAVING to disclose the fair value
This is a recommendation, not a requirement
2) The option of valuing assets by cost model is literally that … it’s an option that is selected by the company
You give the impression that you think that cost model is chosen because there is no reliable information about fair values.
This is not correct – there could very well be perfectly adequate information about fair values
If a company chooses to value under the cost model it’s because the company … chooses to value under the cost model and has nothing to do with the availability or non-availability of fair values
OK?
January 9, 2017 at 9:49 am #365767Hi,
Thank you so much for explaining it to me. And I am truly sorry for my wording mistake.
I did read it again and again, and I found my answers.January 9, 2017 at 10:16 am #365775There’s no need to apologise for your English!
You should hear my attempts at Finnish!
Glad to have helped 🙂
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