Market values are totally unappealing to me because they

Reference no: EM13572276

Critically evaluate these comments. Please do not wander; concentrate on the issues described by the quotation.

To me, economic value is the only justifiable basis for measuring plant assets for purposes of evaluating performance. By economic value, I mean the present value of expected future services. Still, we do not even do this acquisition of new assets - that is, we may compute a positive net present value, using discounted case flow; but we record the asset at no more than its cost. In this way, the excess present value is not shown in the initial balance sheet. Moreover, the use of replacement costs in the subsequent years is also unlikely to result in showing economic values. The replacement cost will probably be less than economic value at any given instant of an asset's life.

Market values are totally unappealing to me because they represent a second-best alternative value- that is, they ordinarily represent the maximum amount obtainable from an alternative that has been rejected. Obviously, if the market value exceeds the economic value of the assets in use, they should be sold. However, in most instances, the opposite is true; market values of individual assets are far below their economic value in use.

The obtaining and recording of total present values of individual assets based on discounted-cash-flow techniques is an infeasible alternative. I, therefore, conclude that replacement cost of similar assets producing similar services is the best practical approximation of the economic value of the assets in use. Of course, it is more appropriate for the evaluation of the division's performance than the division manager's performance.

Reference no: EM13572276

Questions Cloud

Rohan corporation holds assets with a fair value of 150000 : rohan corporation holds assets with a fair value of 150000 and a book value of 125000 and liabilities with a book value

Climber corporation acquired 90 percent of wisden : climber corporation acquired 90 percent of wisden corporation for 180000 cash. wisden reported net income of 30000 and

How do i analyze each transaction and record it in the : how do analyze each transaction and record it in the general journal by using pg. 3 to begin januarys transactions?if

What is the total product cost for an item it costs 1115 to : what is the total product cost for an item? it costs 11.15 to produce this includes packaging. below are the important

Market values are totally unappealing to me because they : critically evaluate these comments. please do not wander concentrate on the issues described by the quotation.to me

Finestra corporation produces a single product that it : finestra corporation produces a single product that it currently sells for 10. fixed expenses are 120000 for the year

In recent years walz company has purchased three machines : in recent years walz company has purchased three machines. because of frequent employee turnover in the accounting

If sales increase by 10 what income from operations would : wind bicycle company sold 500 bikes in december 2003. the selling price was 500 per unit the variable expenses were 300

Determine the amount of value-added and non-value-added : master chef appliance company manufactures home kitchen appliances. the manufacturing process includes stamping final

User Account

All Pages