Fixed Assets Valuation - How should Fixed Assets be Valued
At historical cost or replacement cost. Historical cost gives only the cost at which it was purchased whereas replacement cost gives us the cost that will be incurred to actually purchase the machine in the present year. According to me fixed assets should be valued at replacement cost since it represents the correct value of the asset. What is your opinion?
Fixed assets are valued at cost less depreciation. One of the main reasons for providing depreciation is to provide for the replacement of the asset in due time. Assets are not shown at cost only if its obsolete or the entity is about to be wound up. Replacement cost don't show the actual value of asset at hand on a particular date so historical value is the best way to value an asset.
You should also refer to accounting standard 10. You can refer AS 10 - Accounting for Fixed Assets, it gives valuation of Fixed Assets under different circumstances.
The best solution to the paradox of objective valuation and creation of fund for replacement may be this;
1. Revalue the assets and carry the value in revaluation reserve.
2. The depreciation on the higher value ensures adequate build up of funds for the replacement of assets and also prevents the distribution of anticipated profits if the excess depn is not set off against the revaluation reserve.
Question: How fixed assets are
valued, at historical cost or replacement cost. Historical cost gives only the
cost at which it was purchased whereas replacement cost gives us the cost that
will be incurred to actually purchase the machine in the... read more
Depreciation is being provided to the fixed assets since the value of the assets will go down year by year. So the fixed assets value should be taken after the depreciated value.
by CMHypno 8 years ago
Do you think this will happen?http://www.dailymail.co.uk/news/worldne … e-GDP.html
by Rohan Mundhey 3 years ago
What is depreciation & it's methods of determination of depreciation
Copyright © 2018 HubPages Inc. and respective owners. Other product and company names shown may be trademarks of their respective owners. HubPages® is a registered Service Mark of HubPages, Inc. HubPages and Hubbers (authors) may earn revenue on this page based on affiliate relationships and advertisements with partners including Amazon, Google, and others.
|HubPages Device ID||This is used to identify particular browsers or devices when the access the service, and is used for security reasons.|
|Login||This is necessary to sign in to the HubPages Service.|
|HubPages Traffic Pixel||This is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.|
|Remarketing Pixels||We may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.|
|Conversion Tracking Pixels||We may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.|