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Free «Should there be Leeway in Reporting Company Assets» Essay Sample

Reporting of fixed assets for companies should have provisions for flexibility. It is important that accountants have a free will to report their assets either at the current market value or their original purchase price.  This means that a company may depart from some principles of reporting its assets if it appears to the directors that there are special reasons for reporting their assets at the current market value or using the purchase price (Denny, 2000). One cause of this is when a company is insolvent.  

The choice of reporting fixed assets may be based on the purchase price of fixed assets with a limited useful economic life which must be depreciated in the accounts Denny (2000). This depreciation may therefore be calculated on the purchase price or the production cost. Accountants may choose to record many assets at their purchase price and not at their current market value. It is therefore important give autonomy in the reporting procedures of the fixed assets.

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Based on the fact that companies may have different types of assets such as tangible and intangible assets the implication is that reporting these assets should depend on the type of asset. In support of this argument Denny (2000) says that intangible fixed assets apart from goodwill can be reported at their current cost while tangible fixed assets may be included at market value. On the other hand Denny says that current assets must be reported at their purchase price unless the net realizable value is less (2000). The main argument is that a company usually has different categories of assets which can be reported at either current market value or their original purchase price.

Research shows that an asset maintains its purchase price or its initial value regardless of factors such as inflation and current market price (Halpin & Senior, 2009). On the other hand assets market value is determined by how much money the asset the asset would make if it was put up for sale at the time the report is being prepared. The conditions in reporting all assets at either current market value or their original purchase price are dependent on the above factors and this means that there should be a leeway when reporting company assets.

   

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