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Hello. Hope your are fine!
1. Is it true to say that the true value of an asset or a liability is actually their fair values then in the case of the assets the value of assets is increased or decreased based on its condition at the time of sale but how that works with a liability?
2. When the fair value of the assets increase then we record this gain in the statement of other comprehensive income but when do we record the revaluation surplus in the SOFP?
3. Is there a difference between fair values and market values?
4. Is it true that in case of liquidation we calculate the fair values of total assets and total liabilities respectively which refers to the price of asset agreed between buyer and seller?
5. But the equity worth is determined by its market values (not fair value) which refers to the price of equity items of a business de by the stock exchange?
6. Do we study in any ACCA paper about the factors that decide the market value of a business based on the balance of its total equity items?
Thanks in advance.
1. Yes their true value is the fair value, sometimes referred to as the market value. The value of the liability is likely to change due to changes in interest rates but that is beyond the FR syllabus.
2. What is recorded in OCI is reflected in the reserves on the SFP in a similar fashion to the profit being recorded in retained earnings.
3. No
4. Yes, we need to show the assets and liabilities at what we expect to receive and pay.
5. The market value of equity is the price per share multiplied by the number of shares in issue. This will be different to the book value of equity in the financial statements.
6. I think you touch upon it in FM and AFM, so something to look forward to.
Thanks
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