Asset Valuation Concept

Abstract

The purpose of the study is to analyse the problems arising from the use of historical cost, market value and fair value to increase the relevance of reporting data. The research is based on such scientific methods as analysis, synthesis, deduction, scientific abstraction. When writing the article, the regulatory documents governing the reporting procedure in our country, as well as the Law “On Limited Liability Companies” were analyzed. Based on the analysis of the balance sheet and the statement of financial results, using dynamic and static balance theories for their usefulness for external users, the need for a synthesis of these theories is substantiated. The subjectivity of historical cost is determined and the features of its use and application in the current accounting practice are highlighted. The relationship between historical cost and fair values is shown.The inconsistency and discrepancy between the order of formation of historical value in the domestic accounting system and the dynamic balance theory has been proven. A procedure for using fair value is proposed. The subjectivity and labor intensity of its determination of fair value are highlighted. The reasons are revealed that prevent an organization from generating information about its financial position and performance results. As a result of the work, we have identified shortcomings in reflecting the results of asset revaluation in the financial statements from the perspective of generating information in the balance sheet and the statement of financial results of the organization. A procedure has been developed for using historical and fair value to generate accounting (financial) statements in accordance with their purpose. An algorithm for generating a balance sheet corresponding to the static balance theory and a report on the financial results of the organization’s activities corresponding to the dynamic balance theory is presented. An algorithm for generating a balance sheet corresponding to the static balance theory and a report on the financial results of the organization’s activities corresponding to the dynamic balance theory is presented. The results of the study will be useful to researchers and practicing accountants.

Keywords

• asset valuation
• historical cost
• fair value