- 3 Marks
Question
In public sector accounting, assets and liabilities are valued at their current market values or at fair prices, which is defined as the amount of money that would have to be paid to acquire the asset on the valuation date.
Required: Explain how you would ascertain the current market values of the following public sector assets:
i) Securities;
ii) Motor Vehicles;
iii) Office buildings.
Answer
i) Securities: It may be possible to use information on securities traded on a stock exchange to value similar securities by analogy, making an allowance for the inferior marketability of non-traded securities.
ii) Motor Vehicles: If an existing fixed asset like a vehicle is no longer being produced but has been replaced by a newer model with significantly different characteristics, it may be reasonable to assume that the price of the existing asset would have moved in the same way as the price of the current model being sold.
iii) Office Buildings: Fixed assets like office buildings are often recorded in the balance sheet at their “written-down replacement cost,” which is the original acquisition value adjusted for price changes and written down for accumulated consumption of fixed capital.
- Tags: Asset Valuation, Motor Vehicles, Office Buildings, Public Sector, Securities
- Level: Level 2
- Uploader: Kwame Aikins