Measurement of assets and liabilities

Question 1

What are carrying amounts or book values

Answer 1

The dollar value assigned to assets and liabilities

Question 2

Alternative measurement systems include

Answer 2

• Historical cost
• Current cost
• Realisable Value
• Present Value

Question 3

Historical Cost

Answer 3

For an Asset: the cash or cash equivalents paid to acquire the asset

For a liability: the amount of proceeds received in exchange for the obligation

Question 4

Current cost

Answer 4

“cost of replacing an asset or settling a liability “

For an Asset: the cash or cash equivalents that would have to be paid to replace the asset

For a liability: the un-discounted amount of cash or cash equivalents that would be required to settle the obligation

Question 5

Realisable Value

Answer 5

“amount that an entity can expect to receive from disposal on an asset or settlement of a liability in the normal course of business “

For an asset: expected cash or cash equivalents from selling the asset

For a liability: the settlement value required to be paid in the normal course of business

Question 6

Present Value

Answer 6

” Sum of the discounted cash flows associated with an item”

For an asset: the present discounted net cash flows associated with the asset

For a liability: the present discounted value of the future net cash flows that are expected to be required to settle the liabilities

Question 7

Fair Value

Answer 7

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 8

Financial information must be

Answer 8

relevant and reliable so that it is useful for decision making