The document provides an overview of cross-cutting measurement issues in International Financial Reporting Standards (IFRS) and the IFRS for Small- and Medium-sized Entities (SMEs). It discusses the key measurements of historical cost, cost model, revaluation model, amortized cost model, and fair value. It also examines the conceptual underpinnings of measurement and the IASB and IPSASB's thinking on prescribing different measurement bases. Finally, it provides examples of applying various measurement approaches such as historical cost and allocating production costs.
Slides from 'The Journey Towards Asset Management Excellence' held 24th July 2014.
It can be difficult to know which asset management approach will help you obtain the maximum value from your assets, while also helping you to keep costs down.
In this free webinar Donald MacDonald will discuss the pros and cons of each approach, as well as examine how these can help you achieve excellence in asset management.
Key Topics:
* The various alternative approaches to asset management available to the FM practitioner.
* The advantages and the disadvantages of each of these approaches.
* The roles that these various approaches play in achieving excellence in asset management.
About Donald:
As Head of Consultancy at Programmed Facility Management, Donald is responsible for Programmed Facility Management's Consultancy team's service provision throughout Australia.
Donald has interests in the development of the FM profession in Australia. He has presented, lectured and had several articles published on topics such as life cycle budgeting, best practice maintenance provision and facilities management in general.
www.programmed.com.au
The document discusses facility planning and capacity management. It covers estimating future capacity needs, analyzing sources to meet demand, and selecting expansion options. Key factors in facility location include transportation, resources, costs, and economic conditions at the national, regional, and local levels. Decision tools like break-even analysis and decision trees can help evaluate capacity and location alternatives.
This document discusses the importance of financial modeling and lifecycle planning for asset management decision making. It emphasizes talking to senior management about value in terms of outcomes rather than specific assets or initiatives. The document outlines how to understand and express value, asset valuation using cash flows, financial modeling, lifecycle costing, and discounted cash flow analysis. It provides an example comparing two options using metrics like net present value, internal rate of return, and cash flow ratio to determine which option provides the best value.
Capital Investment Decision or Capital Budgetingssuserb4bc81
Inflation and Capital Budgeting
Options in Capital Budgeting
Strategy and Analysis in Using Net Present Value
Cost of Capital, and Capital Budgeting
Capital Budgeting for Levered Firm
Risk and Capital Budgeting – Absolute measure and relative measure of risk, certainty equivalent method and risk adjusted discount rate method.
This document provides an overview of Chapter 10 from the textbook "Financial Accounting: A Decision-Making Approach" by King, Lembke, and Smith. The chapter discusses long-lived nonfinancial assets, also known as operating assets, and intangible assets. It covers topics such as determining asset costs, allocating costs over time using depreciation and depletion methods, accounting for asset disposals and impairments, accounting for intangible assets, and factors to consider when financing asset acquisitions. The chapter aims to explain how accounting for these assets facilitates decision making.
This document outlines several special decision situations in capital budgeting, including:
1) Choosing between projects of unequal life by converting costs to a uniform annual equivalent
2) Determining optimal timing by examining net future value at alternative dates
3) Calculating economic life by minimizing total annual costs over an asset's life
It also discusses adjusting net present value for financing effects using the adjusted present value (APV) method and adjusting the cost of capital. Additional topics covered are inflation, international capital budgeting, and investing in organizational capabilities.
This chapter discusses special capital budgeting situations including choosing between projects of unequal life, optimal timing decisions, determining economic life, adjusting the cost of capital for financing effects, considering inflation, international capital budgeting, and investing in organizational capabilities. It provides formulas and examples for calculating uniform annual equivalents, adjusted present value, weighted average cost of capital, and the impact of inflation and foreign exchange rates. Key organizational capabilities mentioned are external integration, internal integration, flexibility, and capacity to experiment.
This document provides an overview of cost and management accounting. It defines cost accounting as classifying, accumulating, assigning, and controlling costs. The objectives of cost accounting are to analyze expenditures, develop cost standards, indicate inefficiencies, provide data for financial reports, reveal sources of economies, provide actual cost figures, and more. Cost accounting aids management, creditors, employees, and the national economy. Its scope includes cost ascertainment, cost control, proper cost-revenue matching, and aiding management decisions. Cost accounting differs from financial accounting and management accounting in its objectives, nature, flexibility, precision, and other factors. The document also outlines advantages like assisting management and reducing costs, and disadvantages like only recording past performance and requiring expertise
Slides from 'The Journey Towards Asset Management Excellence' held 24th July 2014.
It can be difficult to know which asset management approach will help you obtain the maximum value from your assets, while also helping you to keep costs down.
In this free webinar Donald MacDonald will discuss the pros and cons of each approach, as well as examine how these can help you achieve excellence in asset management.
Key Topics:
* The various alternative approaches to asset management available to the FM practitioner.
* The advantages and the disadvantages of each of these approaches.
* The roles that these various approaches play in achieving excellence in asset management.
About Donald:
As Head of Consultancy at Programmed Facility Management, Donald is responsible for Programmed Facility Management's Consultancy team's service provision throughout Australia.
Donald has interests in the development of the FM profession in Australia. He has presented, lectured and had several articles published on topics such as life cycle budgeting, best practice maintenance provision and facilities management in general.
www.programmed.com.au
The document discusses facility planning and capacity management. It covers estimating future capacity needs, analyzing sources to meet demand, and selecting expansion options. Key factors in facility location include transportation, resources, costs, and economic conditions at the national, regional, and local levels. Decision tools like break-even analysis and decision trees can help evaluate capacity and location alternatives.
This document discusses the importance of financial modeling and lifecycle planning for asset management decision making. It emphasizes talking to senior management about value in terms of outcomes rather than specific assets or initiatives. The document outlines how to understand and express value, asset valuation using cash flows, financial modeling, lifecycle costing, and discounted cash flow analysis. It provides an example comparing two options using metrics like net present value, internal rate of return, and cash flow ratio to determine which option provides the best value.
Capital Investment Decision or Capital Budgetingssuserb4bc81
Inflation and Capital Budgeting
Options in Capital Budgeting
Strategy and Analysis in Using Net Present Value
Cost of Capital, and Capital Budgeting
Capital Budgeting for Levered Firm
Risk and Capital Budgeting – Absolute measure and relative measure of risk, certainty equivalent method and risk adjusted discount rate method.
This document provides an overview of Chapter 10 from the textbook "Financial Accounting: A Decision-Making Approach" by King, Lembke, and Smith. The chapter discusses long-lived nonfinancial assets, also known as operating assets, and intangible assets. It covers topics such as determining asset costs, allocating costs over time using depreciation and depletion methods, accounting for asset disposals and impairments, accounting for intangible assets, and factors to consider when financing asset acquisitions. The chapter aims to explain how accounting for these assets facilitates decision making.
This document outlines several special decision situations in capital budgeting, including:
1) Choosing between projects of unequal life by converting costs to a uniform annual equivalent
2) Determining optimal timing by examining net future value at alternative dates
3) Calculating economic life by minimizing total annual costs over an asset's life
It also discusses adjusting net present value for financing effects using the adjusted present value (APV) method and adjusting the cost of capital. Additional topics covered are inflation, international capital budgeting, and investing in organizational capabilities.
This chapter discusses special capital budgeting situations including choosing between projects of unequal life, optimal timing decisions, determining economic life, adjusting the cost of capital for financing effects, considering inflation, international capital budgeting, and investing in organizational capabilities. It provides formulas and examples for calculating uniform annual equivalents, adjusted present value, weighted average cost of capital, and the impact of inflation and foreign exchange rates. Key organizational capabilities mentioned are external integration, internal integration, flexibility, and capacity to experiment.
This document provides an overview of cost and management accounting. It defines cost accounting as classifying, accumulating, assigning, and controlling costs. The objectives of cost accounting are to analyze expenditures, develop cost standards, indicate inefficiencies, provide data for financial reports, reveal sources of economies, provide actual cost figures, and more. Cost accounting aids management, creditors, employees, and the national economy. Its scope includes cost ascertainment, cost control, proper cost-revenue matching, and aiding management decisions. Cost accounting differs from financial accounting and management accounting in its objectives, nature, flexibility, precision, and other factors. The document also outlines advantages like assisting management and reducing costs, and disadvantages like only recording past performance and requiring expertise
The document discusses concepts related to working capital management. It defines working capital as the difference between current assets and current liabilities. It discusses various types of working capital like gross, net, permanent, temporary, etc. It explains the working capital cycle and requirements of working capital for different types of businesses. It discusses objectives, measurement, and management of working capital and provides methods to estimate working capital requirements like percentage of sales method and regression analysis method.
SE 307-CHAPTER_9_PROJECT_CASH_FLOW_ANALYSIS.pptAishaKhan527933
This document discusses project cash flow analysis for a manufacturing company. It provides definitions for different types of costs including direct materials, direct labor, manufacturing overhead, non-manufacturing overhead, marketing, and administrative costs. It also defines fixed, variable, and mixed costs. An example is provided to calculate average unit cost. The document then provides an example cash flow analysis for a project to install a new computer control system over 5 years. It shows the income statement, cash flow statement, and calculates that the project has a 22.55% internal rate of return, making it justified above the 15% minimum acceptable rate of return.
The document discusses concepts related to the deterioration of asset values. It defines key terms like impairment loss, recoverable amount, fair value, and value in use. It explains how to estimate the value in use of an asset by projecting future cash flows. It also discusses how impairment losses occur when the recoverable amount of an asset is less than its carrying amount. The document then summarizes how impairment is assessed for inventories and other asset types. It provides examples of impairment calculations and discloses the accounting entries. Finally, it distinguishes between depreciation, amortization, and impairment.
This document discusses capital budgeting and various techniques used to evaluate capital expenditure projects. It defines capital budgeting as evaluating long-term investments to maximize shareholder wealth. Various criteria used to evaluate projects are discussed, including traditional non-discounted methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The advantages and disadvantages of each method are also summarized.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
The document discusses the advantages of preparing a funds flow statement. It lists five key advantages:
1) It helps analyze the financial operations of a company by showing the impact of transactions on operational and financial status over time.
2) It helps form a reasonable dividend policy by considering liquidity constraints beyond just available profits.
3) It helps properly distribute limited resources by informing management decisions about resource allocation.
4) It helps improve the use of working capital by revealing efficiency and steps to enhance working capital management.
5) It helps assess the overall creditworthiness of a firm for institutions providing loans by examining repayment capacity over multiple years.
Working capital refers to the capital required to meet the day-to-day operational expenses of a business like wages, raw materials, utilities etc. It consists of current assets like inventory, receivables, cash etc. Proper management of working capital involves determining the optimal level of current assets and liabilities and arranging sources to finance them. The key components of working capital to be managed are inventory, receivables and cash. Firms use various short-term financing options like bank finance, trade credit, commercial paper etc. to manage their working capital requirements.
Management AccountingActivity Based Costing vs Absorption Cost.docxinfantsuk
Management Accounting
Activity Based Costing vs Absorption Costing
Table of Contents
Budgeted Profit Statements 1
1.1 Absorption Costing 1
1.2 Activity Based Costing 3
1.3 Comments on the results 5
2.0 Discussion of the statement 6
References 9
0
2
1.0 Budgeted Profit Statements
1.1 Absorption Costing
Traditional absorption costing involves the calculation of product cost, using direct and indirect variable costs and fixed and variable overheads, which are substituted over the complete production. Overhead cost substitution is based upon the process activity that drives the cost. Machine hours and assembly hours are two example activities that influence product development; overheads are allocated based upon the hours consumed in each department.
The following table summarises the activity levels involved in the production process:
Product
Units
Machine (Hours)
Assembly (Hours)
Setups
Orders
Suppliers
XYI
50,000
100,000
350,000
120
8,000
3,000
YZT
40,000
200,000
120,000
200
8,000
4,000
ABW
30,000
120,000
60,000
200
16,000
4,200
Total
120,000
420,000
530,000
520
32,000
11,200
When the cost is allocated to each product, finding each product’s contribution towards overhead provides a clearer picture. The following table summarises the total contributions of the three products.
Total Contribution
Products
Selling Price (£)
(1)
Cost Price (£)
(2)
Contribution (£)
(3)= (1)-(2)
Units
(4)
Total Contribution (5)= (3)x(4)
XYI
45
32
13
50,000
650,000
YZT
95
84
11
40,000
440,000
ABW
73
65
8
30,000
240,000
The absorption rate on which the overhead cost is allocated to the products is also important in making the profit and loss statement. Since this involves two significant activities, the overhead is allocated over these two cost drivers.
· O/H Absorption rate (Machine Hours)
Overheads / machine hours = £504,000 / 420,000 = £1.20/hour
· O/H Absorption rate (Assembly Hours)
Overheads / assembly hours = £437,000 / 530,000 = £0.8245/hour
Based upon absorption rates, the following table summarises the division of overhead costs over the three products.
Machine Hours
Assembly Hours
Products
Hours
(1)
Rate
(2)
Overheads
(3)=(1)*(2)
Hours
(4)
Rate
(5)
Overheads
(6)=(4)*(5)
Total O/H
(7)=(3)+(6)
XYI
100,000
1.20
120,000
350,000
0.8245
288,575
408,575
YZT
200,000
1.20
240,000
120,000
0.8245
98,940
298,940
ABW
120,000
1.20
144,000
60,000
0.8245
49,470
169,470
504,000
436,985
940,985
· Statement of Profit / (Loss)
Using Absorption Costing Method
Revenue
XYI
YZT
ABW
(1) Units
50,000 units
40,000 units
30,000 units
(£)
(£)
(£)
(£)
(2) Sale Price
45
95
73
(3) Cost Price
32
84
65
(4) Contribution (2) – (3)
13
11
8
Total Contribution (4) * (1)
650,000
440,000
240,000
1,330,000
Overheads *
(408,575)
(298,940)
(169,470)
(940,985)
Net Profit
241,425
101,060
46,530
389,015
1.2 Activity Based Costing
The focus of activity based costing is upon departmentalizing overheads cost; this cost can be attributed to th ...
1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
4) It addresses special considerations like how to incorporate inflation, evaluate projects of unequal lengths, and use
This document provides an overview of various valuation models and concepts. It begins with an introduction to discounted cash flow (DCF) valuation, comparative valuation ratios like P/E, and valuation approaches. It then discusses specific valuation models in more detail, including DCF, dividend discount models, and relative valuation models. It also covers valuation concepts such as enterprise value, EV/Sales, EV/EBITDA, and the steps involved in a DCF valuation such as projecting free cash flows, determining the discount rate, estimating terminal value, and discounting future cash flows.
This document provides an overview of the exercises, problems, cases, and internet assignment in Chapter 9 of the textbook. It includes a table that lists each exercise/problem/case topic, the relevant learning objectives, and characteristics. It also provides brief descriptions of each problem, case, and the internet assignment, including estimated completion times and difficulty ratings. The chapter covers topics like capital vs. revenue expenditures, depreciation methods, accounting for plant and intangible assets, natural resources, and annual report presentations.
The document discusses capital budgeting and estimating cash flows. It defines capital budgeting as identifying, analyzing, and selecting investment projects with returns extending beyond one year. The capital budgeting process involves generating proposals, estimating after-tax cash flows, evaluating projects, selecting projects, and reevaluating implemented projects. It provides examples of estimating initial cash outflows, incremental cash flows, and terminal cash flows for new asset and replacement projects.
Eco 10 ,B COM, IGNOU-Elements of costing
ALL SO USEFUL FOR CA CMA, CS ,B COM, BBA. MBA
IGNOU BCOM ECO-10 (Elements of Costing) Study Material –Dear Learners, The full downloadable free study materials of ECO-10 (Elements of Costing) are listed below to facilitate your studies for securing good marks in upcoming term end examinations. Though, your performance in examination will mostly depend on your efforts only. Even though, I can assure you that the following study materials will proof to be cabalistic in your efforts.
Block- 1 Basic Concepts
Unit-1 Nature and Scope
Unit-2 Concept of Cost and Its Ascertainment
Block- 2 Materials and Labour
Unit-3 Procurement, Storage and Issue
Unit-4 Inventory Control
Unit-5 Pricing the Issue of Materials
Unit-6 Labour
Block- 3 Overheads
Unit-7 Classification and Distribution of Overheads
Unit-8 Absorption of Factory Overheads
Unit-9 Treatment of Other Overheads
Block-4 Methods of Costing
Unit-10 Unit Costing
Unit-11 Reconciliation of Cost Financial Accounts
Unit-12 Job and Contract Costing
Unit-13 Process Costing
1. Cost Accountancy
2. Cost Accounting
2.1 Definition of Cost Accounting2.2 Objectives of Cost Accounting2.3 Importance of Cost Accounting2.4 Advantages of Cost Accounting2.5 Limitations of Cost Accounting2.6 Reports Generated by Cost Accounting Department
3. Installation of Cost Accounting System
3.1 Basic Considerations3.2 Steps in Introduction3.3 Essentials of a Good Cost Accounting System 3.4 Difficulties in Introduction
Working capital refers to funds used for day-to-day operations of a business. It includes current assets like inventory, receivables, cash, and prepaid expenses. Effective working capital management involves determining the appropriate level of current assets and arranging sources of short-term financing. Key aspects of working capital management include accounts receivable management through techniques like factoring, inventory management using methods such as determining economic order quantity and reorder levels, and evaluating sources of working capital.
The document provides an overview of discounted cash flow (DCF) valuation. It discusses the history of DCF dating back to ancient times and its popularity after the 1929 stock market crash. It defines DCF valuation as estimating a company's value based on discounting its predicted future cash flows. The key steps in DCF valuation are estimating future cash flows, determining an appropriate discount rate, and calculating the present value of the future cash flows. DCF valuation requires numerous assumptions about cash flows, growth rates, and discount rates.
This document discusses concepts and management of working capital. It defines key terms like gross working capital, net working capital, fixed working capital and variable working capital. It also outlines factors that affect working capital requirements and methods for estimating working capital needs like the operating cycle method and regression equation method. The document concludes by discussing policies for financing current assets through long term, short term and spontaneous sources.
This document is a resume for Chet Newman, a CPA and CMA with over 30 years of experience in management consulting, cost accounting, and supply chain management. It summarizes his expertise in areas like supply chain management, contracts, budgets, inventory optimization, and ERP implementations. It also provides highlights of his consulting experience with companies in various industries, as well as his regular professional roles involving materials management, financial planning, and cost accounting. Personal details are included like education, certifications, and professional references.
The document outlines Ethiopia's roadmap for adoption of International Financial Reporting Standards (IFRS). It discusses the challenges of adopting IFRS and strategies to address them. The roadmap involves a three-phase transition over three years, beginning with significant public interest entities in 2009 and ending with small and medium entities in 2011. It emphasizes the need for education, training, legal and regulatory changes, and monitoring to ensure successful adoption.
This document provides an overview and summary of International Financial Reporting Standards (IFRSs) for members of the Ethiopian Commodity Exchange (ECX). It discusses why financial reporting standards are important nationally and why organizations conduct financial reporting. It also summarizes the key requirements of general purpose financial statements under IFRSs, including reporting frameworks, objectives of general purpose financial statements, qualitative characteristics of financial reporting, and an overview of important individual IFRSs and IASs. The presentation outlines Ethiopia's phased adoption of IFRSs and the IFRS for SMEs for different types of organizations over three years.
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The document discusses concepts related to working capital management. It defines working capital as the difference between current assets and current liabilities. It discusses various types of working capital like gross, net, permanent, temporary, etc. It explains the working capital cycle and requirements of working capital for different types of businesses. It discusses objectives, measurement, and management of working capital and provides methods to estimate working capital requirements like percentage of sales method and regression analysis method.
SE 307-CHAPTER_9_PROJECT_CASH_FLOW_ANALYSIS.pptAishaKhan527933
This document discusses project cash flow analysis for a manufacturing company. It provides definitions for different types of costs including direct materials, direct labor, manufacturing overhead, non-manufacturing overhead, marketing, and administrative costs. It also defines fixed, variable, and mixed costs. An example is provided to calculate average unit cost. The document then provides an example cash flow analysis for a project to install a new computer control system over 5 years. It shows the income statement, cash flow statement, and calculates that the project has a 22.55% internal rate of return, making it justified above the 15% minimum acceptable rate of return.
The document discusses concepts related to the deterioration of asset values. It defines key terms like impairment loss, recoverable amount, fair value, and value in use. It explains how to estimate the value in use of an asset by projecting future cash flows. It also discusses how impairment losses occur when the recoverable amount of an asset is less than its carrying amount. The document then summarizes how impairment is assessed for inventories and other asset types. It provides examples of impairment calculations and discloses the accounting entries. Finally, it distinguishes between depreciation, amortization, and impairment.
This document discusses capital budgeting and various techniques used to evaluate capital expenditure projects. It defines capital budgeting as evaluating long-term investments to maximize shareholder wealth. Various criteria used to evaluate projects are discussed, including traditional non-discounted methods like average rate of return and payback period, as well as discounted cash flow methods like net present value, internal rate of return, and profitability index. The advantages and disadvantages of each method are also summarized.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
The document discusses the advantages of preparing a funds flow statement. It lists five key advantages:
1) It helps analyze the financial operations of a company by showing the impact of transactions on operational and financial status over time.
2) It helps form a reasonable dividend policy by considering liquidity constraints beyond just available profits.
3) It helps properly distribute limited resources by informing management decisions about resource allocation.
4) It helps improve the use of working capital by revealing efficiency and steps to enhance working capital management.
5) It helps assess the overall creditworthiness of a firm for institutions providing loans by examining repayment capacity over multiple years.
Working capital refers to the capital required to meet the day-to-day operational expenses of a business like wages, raw materials, utilities etc. It consists of current assets like inventory, receivables, cash etc. Proper management of working capital involves determining the optimal level of current assets and liabilities and arranging sources to finance them. The key components of working capital to be managed are inventory, receivables and cash. Firms use various short-term financing options like bank finance, trade credit, commercial paper etc. to manage their working capital requirements.
Management AccountingActivity Based Costing vs Absorption Cost.docxinfantsuk
Management Accounting
Activity Based Costing vs Absorption Costing
Table of Contents
Budgeted Profit Statements 1
1.1 Absorption Costing 1
1.2 Activity Based Costing 3
1.3 Comments on the results 5
2.0 Discussion of the statement 6
References 9
0
2
1.0 Budgeted Profit Statements
1.1 Absorption Costing
Traditional absorption costing involves the calculation of product cost, using direct and indirect variable costs and fixed and variable overheads, which are substituted over the complete production. Overhead cost substitution is based upon the process activity that drives the cost. Machine hours and assembly hours are two example activities that influence product development; overheads are allocated based upon the hours consumed in each department.
The following table summarises the activity levels involved in the production process:
Product
Units
Machine (Hours)
Assembly (Hours)
Setups
Orders
Suppliers
XYI
50,000
100,000
350,000
120
8,000
3,000
YZT
40,000
200,000
120,000
200
8,000
4,000
ABW
30,000
120,000
60,000
200
16,000
4,200
Total
120,000
420,000
530,000
520
32,000
11,200
When the cost is allocated to each product, finding each product’s contribution towards overhead provides a clearer picture. The following table summarises the total contributions of the three products.
Total Contribution
Products
Selling Price (£)
(1)
Cost Price (£)
(2)
Contribution (£)
(3)= (1)-(2)
Units
(4)
Total Contribution (5)= (3)x(4)
XYI
45
32
13
50,000
650,000
YZT
95
84
11
40,000
440,000
ABW
73
65
8
30,000
240,000
The absorption rate on which the overhead cost is allocated to the products is also important in making the profit and loss statement. Since this involves two significant activities, the overhead is allocated over these two cost drivers.
· O/H Absorption rate (Machine Hours)
Overheads / machine hours = £504,000 / 420,000 = £1.20/hour
· O/H Absorption rate (Assembly Hours)
Overheads / assembly hours = £437,000 / 530,000 = £0.8245/hour
Based upon absorption rates, the following table summarises the division of overhead costs over the three products.
Machine Hours
Assembly Hours
Products
Hours
(1)
Rate
(2)
Overheads
(3)=(1)*(2)
Hours
(4)
Rate
(5)
Overheads
(6)=(4)*(5)
Total O/H
(7)=(3)+(6)
XYI
100,000
1.20
120,000
350,000
0.8245
288,575
408,575
YZT
200,000
1.20
240,000
120,000
0.8245
98,940
298,940
ABW
120,000
1.20
144,000
60,000
0.8245
49,470
169,470
504,000
436,985
940,985
· Statement of Profit / (Loss)
Using Absorption Costing Method
Revenue
XYI
YZT
ABW
(1) Units
50,000 units
40,000 units
30,000 units
(£)
(£)
(£)
(£)
(2) Sale Price
45
95
73
(3) Cost Price
32
84
65
(4) Contribution (2) – (3)
13
11
8
Total Contribution (4) * (1)
650,000
440,000
240,000
1,330,000
Overheads *
(408,575)
(298,940)
(169,470)
(940,985)
Net Profit
241,425
101,060
46,530
389,015
1.2 Activity Based Costing
The focus of activity based costing is upon departmentalizing overheads cost; this cost can be attributed to th ...
1) The document discusses various methods and considerations for capital investment and budgeting decisions, including determining relevant cash flows, accounting for inflation, and different approaches to calculating operating cash flow.
2) It emphasizes that capital budgeting decisions should be based on incremental after-tax cash flows rather than accounting profits and highlights factors like sunk costs, opportunity costs, and side effects.
3) The document provides a detailed example of a capital budgeting analysis for a company considering investing in a new machine and outlines the calculation of cash flows and net present value.
4) It addresses special considerations like how to incorporate inflation, evaluate projects of unequal lengths, and use
This document provides an overview of various valuation models and concepts. It begins with an introduction to discounted cash flow (DCF) valuation, comparative valuation ratios like P/E, and valuation approaches. It then discusses specific valuation models in more detail, including DCF, dividend discount models, and relative valuation models. It also covers valuation concepts such as enterprise value, EV/Sales, EV/EBITDA, and the steps involved in a DCF valuation such as projecting free cash flows, determining the discount rate, estimating terminal value, and discounting future cash flows.
This document provides an overview of the exercises, problems, cases, and internet assignment in Chapter 9 of the textbook. It includes a table that lists each exercise/problem/case topic, the relevant learning objectives, and characteristics. It also provides brief descriptions of each problem, case, and the internet assignment, including estimated completion times and difficulty ratings. The chapter covers topics like capital vs. revenue expenditures, depreciation methods, accounting for plant and intangible assets, natural resources, and annual report presentations.
The document discusses capital budgeting and estimating cash flows. It defines capital budgeting as identifying, analyzing, and selecting investment projects with returns extending beyond one year. The capital budgeting process involves generating proposals, estimating after-tax cash flows, evaluating projects, selecting projects, and reevaluating implemented projects. It provides examples of estimating initial cash outflows, incremental cash flows, and terminal cash flows for new asset and replacement projects.
Eco 10 ,B COM, IGNOU-Elements of costing
ALL SO USEFUL FOR CA CMA, CS ,B COM, BBA. MBA
IGNOU BCOM ECO-10 (Elements of Costing) Study Material –Dear Learners, The full downloadable free study materials of ECO-10 (Elements of Costing) are listed below to facilitate your studies for securing good marks in upcoming term end examinations. Though, your performance in examination will mostly depend on your efforts only. Even though, I can assure you that the following study materials will proof to be cabalistic in your efforts.
Block- 1 Basic Concepts
Unit-1 Nature and Scope
Unit-2 Concept of Cost and Its Ascertainment
Block- 2 Materials and Labour
Unit-3 Procurement, Storage and Issue
Unit-4 Inventory Control
Unit-5 Pricing the Issue of Materials
Unit-6 Labour
Block- 3 Overheads
Unit-7 Classification and Distribution of Overheads
Unit-8 Absorption of Factory Overheads
Unit-9 Treatment of Other Overheads
Block-4 Methods of Costing
Unit-10 Unit Costing
Unit-11 Reconciliation of Cost Financial Accounts
Unit-12 Job and Contract Costing
Unit-13 Process Costing
1. Cost Accountancy
2. Cost Accounting
2.1 Definition of Cost Accounting2.2 Objectives of Cost Accounting2.3 Importance of Cost Accounting2.4 Advantages of Cost Accounting2.5 Limitations of Cost Accounting2.6 Reports Generated by Cost Accounting Department
3. Installation of Cost Accounting System
3.1 Basic Considerations3.2 Steps in Introduction3.3 Essentials of a Good Cost Accounting System 3.4 Difficulties in Introduction
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2. 2
Aim
»Understand the main measurements specified in IFRS and the
IFRS for SMEs
» Historical cost
» Cost model
» Revaluation model
» Amortised cost model
» Fair value (a separate session this afternoon)
» Value in use and net realisable value (a separate session tomorrow)
6. 6
Many measurements
IFRS IPSAS IFRS for SMEs
Historical cost ✔ ✔ ✔
Modified historical cost (the cost model) ✔ ✔ ✔
Market/Fair value (the fair value model) ✔ ✔ ✔
Modified fair value (the revaluation model) ✔ ✔ ✔
Value in use of an asset/
Fulfilment value of a liability
✔ ✔ ✔
Net selling price/Net realisable value ✔ ✔ ✔
Onerousness of a contract ✔ ✔ ✔
Other measurements (O)… ✔ ✔ ✔
6
7. 7
Mixed measurement model
source of measurement bases indicated: IFRS
Assets IFRS measure Equity IFRS measure
Unimpaired land (PPE) &
indefinite life intangibles
Historical cost (HC) or fair value (FV) (choice) Residual
(assets minus liabilities)
What does it mean?
Other PPE, intangibles and
bearer plants
Modified (M)HC or modified FV (choice) Liabilities IFRS measure
Investment property MHC or FV (choice) Bank loan Amortised cost (AC)
Biological assets FV less costs to sell (except bearer plants) Trade payable AC
Investments in associates Equity method Derivatives and others
when FV option is used
FV
Other financial instruments MHC or FV (depends on cash flow
characteristics and business model)
Provisions Amount to settle or
transfer today
Inventories Lower of HC and net realisable value;
exceptions FV and NRV
Defined benefit employee
benefits
Projected unit credit
method
TOTAL What does it mean? TOTAL What does it mean?
7
16. 16
Historical cost of an asset (inventory)
allocating production costs to joint products and by-products
Example 3: A chemical manufacturer incurs production process
costs $2,000,000 (including allocated overheads) to produce:
»Example 3A (by-product):
»100,000 litres of Product (sales value = $4,000,000); and
»1,000,000 litres of By-product (sales value = $10,000).
What is the cost per litre of Product produced? Choose 1 of:
1) $20 (ie $2,000,000 ÷ 100,000 litres)
2) $19.9 (ie ($2,000,000 - $10,000) ÷ 100,000 litres)
3) $19.95 (ie $2,000,000 x $4,000,000/$4,010,000) ÷ 100,000 litres)
4) $1.82 (ie $2,000,000 x 100,000/1,100,000 litres) ÷ 100,000 litres)
17. 17
Historical cost of an asset (inventory)
allocating production costs to joint products and by-products
»Example 3B (joint product):
»100,000 litres of Product A (sales value = $4,000,000); and
»1,000,000 litres of Product B (sales value = $1,000,000).
What is the cost per litre of Product A produced? Choose 1 of:
1) $20 (ie $2,000,000 ÷ 100,000 litres)
2) $10 (ie ($2,000,000 - $1,000,000) ÷ 100,000 litres)
3) $16 (ie $2,000,000 x $4,000,000/$5,000,000) ÷ 100,000 litres)
4) $1.82 (ie $2,000,000 x 100,000/1,100,000 litres) ÷ 100,000 litres)
46. The fair value model
(a separate session this afternoon)
47. 47
Fair value of an asset
the concept
» The fair value of an asset is:
» the price that would be received to sell an asset (exit price)
» in an orderly transaction (not a forced sale)
» between market participants (market-based view)
» at the measurement date (current price) (see IFRS 13 Fair Value Measurement)
» The fair value of an asset is:
» the amount for which the asset could be exchanged between knowledgeable, willing
parties in an arm’s length transaction (The Glossary of Terms in the IFRS for SMEs)
» for application guidance see paragraphs 11.27 to 11.32
» Market participant perspective: consequently, the entity’s intention to hold
an asset is not relevant when measuring fair value.
52. 52
IFRS for SMEs
undue cost or effort exemptions
» Investment property whose fair value cannot be determined reliably on an
ongoing basis without undue cost or effort is exempt from fair value
measurement and must instead be carried using the cost model (ie
historical cost less depreciation less impairment).
» Mixed use property must be separated between investment property and
PPE. However, if the fair value of the investment property component
cannot be measured reliably without undue cost or effort, the entire
property is accounted for as PPE (using the cost model).
» The property-by-property option to include in ‘Investment property carried
at fair value’, operating leasehold property interests that otherwise satisfy
the definition of investment property, is subject to the fair value of the
leasehold interest being reliably measured without undue cost or effort.
53. 53
Investment property: IFRS for SMEs undue cost or effort assessment:
what do you think?
» Entity A’s main assets are ten investment properties: freestanding residential homes in a single
development of over 1,000 near identical homes.
» Each year about twenty to thirty of the homes in the development are sold. The prices at which
land and buildings are sold is publicly available information from a free-to-access website
maintained by the government.
» About half of the homes are investment property rented to third party tenants. Although rentals are
not publicly available, the rentals being asked are published when homes are advertised for rental.
» Entity A is wholly owned by Ms A. Entity A is funded 80% by bank loans and tenant deposits.
» Tenants must pay a deposit equal to twelve months rent before occupying a property. Tenant
deposits are refundable at the end of the lease term provided that the property is ‘returned’ to Entity
A in the specified condition.
» Entity A’s annual financial statements, prepared in accordance with the IFRS for SMEs, are free to
download from Country A’s central repository with which all private companies are required to file
their annual financial statements.
54. 54
Investment property: IFRS for SMEs undue cost or effort assessment:
what do you think?
Does measuring Entity A’s investment property using the fair
value model involve undue cost or effort? Choose one of:
1) Yes;
2) No; or
3) It depends (specify what it depends on).
55. 55
Investment property: IFRS for SMEs undue cost or effort assessment:
what do you think?
» Entity B’s main assets are its ten investment properties. Its properties are in various
towns in a country suffering a devastating civil war with significant bombings by a
number of foreign forces. Over 10 per cent of the country’s population is killed and more
than 20 per cent of its population have fled its borders to seek asylum.
» Although, using satellite technology, Entity B could verify whether its properties have been
destroyed, it is unable to determine whether the tenants continue to occupy the homes.
There is no evidence of any willing buyers for Entity B’s investment properties and there is
no evidence of arm’s length transactions in the country’s property market since the civil
war started three years ago.
» Mr B owns 55% of the equity of Entity B. The remaining equity is held by 1,000 individual
investors that contributed capital to the entity through Entity B’s crowd funding campaign
some years before the outbreak of civil war. Entity A is funded 80 per cent by bank loans.
» Does measuring Entity B’s investment property using the fair value model involve undue
cost or effort? Choose one of:
1) Yes; 2) No; or 3) It depends (specify what it depends on)
58. 58
The revaluation model
reflecting the economics
»Information about an entity’s financial performance in a period,
reflected by changes in economic resources and claims other than
by obtaining resources from (distributing resources to) owners, is
useful in assessing the entity’s ability to generate net cash inflows
(see paragraphs OB18 and OB19 of the Conceptual Framework)
»In presenting the changes in an economic resource (for example, an
item of PPE) in the period the revaluation model separates:
»the consumption of the assets service potential (measured at
current market value); from
»the effect of price changes of the item in the period.
59. 59
The revaluation model
the requirements
»Accounting policy by class of PPE: cost model or revaluation model
» however, the revaluation model is available only for items whose fair value
can be measured reliably
»Carrying amount of revalued PPE at the end of a reporting period
cannot differ materially from its fair value
»Revaluation increases and decreases presented in OCI
» nevertheless, impairments and reversals of impairments are presented in
profit or loss
» no ‘recycling’ from OCI to profit or loss
»Disclosures specified
61. 61
Revaluation model
example
1,000,000
10 years
6 years
4 years
2 years
800,000
1,200,000
900,000
300,000
800,000
600,000
200,000
400,000
300,000
profit or
loss
300,000
OCI
400,000
OCI
200,000
profit or
loss
400,000
OCI
61
79. 79
79
Accounting policies: a question of relevance
What do you think?
» Can an entity voluntarily change its accounting policy for buildings
classified as PPE from the cost model to the revaluation model? (Choose
one of):
1) Yes
2) Probably can, highly likely to provide more relevant information
3) Probably not, highly unlikely to provide more relevant information
4) No
» In future, could that entity revert to the cost model for buildings classified
as PPE? (Choose one of):
1) Yes
2) Probably can, highly likely to provide more relevant information
3) Probably not, highly unlikely to provide more relevant information
4) No
79
79