Net Realizable Value Research Articles

ANALYSIS OF JOINT COST ALLOCATION IN DETERMINING COST OF GOODS PRODUCTION

This scientific research paper aims to provide a detailed understanding of joint cost analysis using the 4(four) methods: physical, sales value at split-off point, net realizable value and constant-gross matgin method. This is research aims to provide information for cake store X on how to manage the costs of production, and to improve the management strategies, for it is known that the store uses the simplest recording of accounting which records only the purchase of inventory while deducting it from the sales of finished goods to determine the profit for the year. The results from this research is the most effective joint cost allocation method for cake shop X is the physical method because it is easy to implement.

Modern problems of determining net realizable value in RAS and IFRS and ways to solve them

Thanks to the Federal Accounting Standard (FAS) 5/2019, net realizable value was introduced into Russian accounting for inventories. A similar value is also used in IAS 2. Despite the relatively long period of use of the specified value, its estimation still raises a number of questions when accounting and reporting according to both Russian and International Standards (hereinafter referred to as RAS and IFRS). These problems and ways to solve them are analyzed in this article. When carrying out research, methods such as analysis and synthesis, grouping method, comparison, analogy method, logical approach, systematic approach were used. As a result of the research carried out in this work, the main modern problems associated with determining the net realizable value in Russian and international accounting have been identified and proposals for their solution have been substantiated. The results obtained in this article will be useful to a wide range of readers interested in current issues relating to the regulations of RAS and IFRS, including the calculation of the net realizable value of inventories, can be used in the educational process of higher educational institutions, in the practical work of accounting departments of modern organizations, as well as in development and improvement of relevant domestic and international accounting standards.

Greek Accounting Standards and Debt Covenants. Changes in Contracting

Businesses, organizations, and even more governments are strongly related with information provided by accounting in order for CEO’s or managers and even more members of parliament to make decisions. Financial statements which contain multiple criteria, and how managers or shareholders treat them influence the decisionmaking of organizations and all types of businesses, public and private. Auditing financial statements ensures their reliability and validity. Both lenders and borrowers must choose the right set of debt covenants to minimize risk from their respective perspectives. It is critical to use and select debt covenants in relation to the side of interest. For instance, in past decades, financial covenants based on balance sheet variables are more likely in debt contracting. Nowadays, the trend of choosing a batch of covenants in contracting changed. In this paper, we investigate the relationship between changing the Greek direction and accounting standard setting. Greek accounting standards are moving away from “old-fashioned” book- and record-keeping standards. This was a great change that took place in 2015, and since then, new notions of accounting practice have been introduced. Fair value, net realizable value, present value, cash equivalents, and useful economic life are some concepts that were first used in accounting the process in Greek economy. Changes were massive and everyone involved with accounting, financial statements, and the way they were introduced should change the way they are analyzed. We hypothesized that this significant shift in accounting standard setting reduces the value of analyzing balance sheets in debt contracting. Since 2015, balance sheet-based covenants started to vanish, especially from private debt contracting. We tried to correlate borrowers and their likelihood in using balance sheet-based covenants. The correlation between the change in accounting standard setting and the concurrent change in trend of choosing accounting-based covenants in debt contracting is being investigated. The results are consistent with our hypothesis. A mechanism that separates multiple covenants and correlates them with significant debt characteristics will be an innovative tool for managers and credit institutions, as well as a more definite way of auditing, for instance, by digitalizing it, which will be a great tool for everyone involved in businesses.
 Keywords: accounting-based covenants, debt contracting, Greek accounting standards

ДЕБІТОРСЬКА ЗАБОРГОВАНІСТЬ ЗА ПРОДУКЦІЮ (ТОВАРИ, РОБОТИ, ПОСЛУГИ) В ОБЛІКОВО-ЕКОНОМІЧНІЙ СИСТЕМІ ПІДПРИЄМСТВА

Calculations are a tool for regulating economic relations, especially in the part of accounts receivable. They are a component of the process of extended reproduction, formation and distribution of the social product. The article examines scientific approaches to the interpretation of the economic category "receivables". It has been established that scientists in the field of economics and enterprise management interpret receivables as: a monetary expression of the result of an economic transaction of a credit nature; a financial instrument arising as a result of economic relations. Accounting scholars identify receivables as: a claim (right), debts, a component of current assets, a financial asset of an enterprise. The methodological aspects of accounting for receivables for products (goods, works, services) are considered: the procedure for recognition, evaluation, classification. The peculiarities of the construction of the accounts receivable accounting system, which arises in the process of implementation, are revealed. In order to detail accounting information about the company's counterparties, which take part in the implementation process, it is proposed to allocate separate sub-accounts for accounting of settlements with domestic and foreign customers. This will increase the analyticity of accounting information and delimit buyers and customers as separate groups of legal entities. The information flows that are present when documenting settlement operations with buyers and customers are highlighted. The display of the process of selling finished products in the system of accounting accounts is shown, based on the terms of the contract concluded with the buyer: on the terms of advance payment, or on the terms of subsequent payment. It is substantiated that in the accounting practice of enterprises, the assessment of receivables depends on the reasons and conditions of its occurrence and involves the use of the following types of assessments: original cost; present value of future payments; net realizable value.

Overview of assessment of enterprise assets according to national accounting standards in the context of safe risks

The prerequisites for revising the revaluation of non-current assets of an enterprise and highlighting the methodological aspects of applying individual national accounting standards (regulations) are considered. The object of the study is the assessment of the assets of the enterprise, which is necessary for the reliable display of information about assets in the financial statements, in the presence of security risks. The application of a valuation requires professional judgment to be made about the fair value of the subject matter. At the same time, the concept of fair, market, net realizable value must be divided taking into account the requirements of national accounting standards (regulations) (NAS(R)). In the case that national standards do not provide an answer to certain questions of the methodology for establishing and revising estimates, the norms of international financial reporting standards should be taken into account. Recognition of accounting items at fair value today is widely used in international practice, in contrast to the Ukrainian experience. Valuation and accounting are interrelated concepts, since financial statements must reflect complete, reliable and impartial information about the value of accounting objects. Today, in Ukrainian accounting, the issue of carrying out the recognition procedure at fair value remains important. This is due to the lack of specific methodological support for this procedure. An analysis of the existing requirements for determining the fair value of certain types of assets makes it possible to make decisions on the basic approach to valuation of assets in the presence of security risks. It was determined that the signs of depreciation of assets under martial law with a high degree of probability is a decrease in the market value of the asset during the reporting period significantly more than expected. This group of signs also includes physical damage to the asset; significant negative changes in the external environment; Significant changes in the way the asset is used during the reporting period.

Analisis Kesesuaian Perlakuan Akuntansi Murabahah Berdasarkan PSAK 102 di BMT Usaha Artha Sejahtera

This study aims to analyze murabahah accounting treatment at Baitul Mal wa Tamwil (BMT ) Usaha Artha Sejahtera which is adjusted to Pernyataan Standar Akuntansi Keuangan (PSAK) 102. The type of research used in this study is a qualitative research with a case study approach. The data used are primary data and secondary data. Data collection techniques used consisted of interviews and documentation. Test the validity of the data using triangulation techniques and sources. The results of research show that there is still accounting treatment that is not fully in accordance with PSAK 102, namely when there is recognition and measurement of murabahah assets BMT Usaha Artha Sejahtera does not recognize murabahah assets at the cost of goods, does not use certain formulas in determining murabahah margins, BMT Do not impose fines on customers but provide a letter of warning in accordance with the policy of the BMT. At the time of presentation of murabahah receivables are not presented in the balance sheet at the net realizable value, but integrated with other receivables as receivables and financing, deferred murabahah margin is not disclosed as a deduction from murabahah receivables, but is recorded as receivables and financing. and the BMT did not disclose the murabahah margin, but disclosed it together with other financing contracts as profit sharing for financing.

The Role and Mechanism of Tanḍīḍ in Calculating the Zakat of Inventories: دور التنضيض وكيفيته في حساب زكاة عُروض التجارة

Zakat is one of the five pillars of Islam, it is a mandatory to pay a specific proportion of specific wealth for specific people, and the inventories are considered one of this wealth that Zakat is required to be paid according to the views of most of the Islamic Schools and most likely Says, the weighted views for paying the value varied in how to evaluate inventories accurately and thus to determine the amount of Zakat, which makes the accountant or the donor to use estimation, so that the results are an approximation and nearly a precaution, and it is further complicated when calculating the Zakat of large commercial companies whose products vary and the size of their inventory increases, that is considered as one of the basic elements of its balance sheet, so that the evaluation would be undisciplined, which questions the results of the Zakat account. Therefore, this study was created, which aimed to research the method of evaluation based on measurement using the method of Tanḍīḍ according to the modern accounting thought of the evaluation according to the concept of net realisable value to be easily applied in the calculation of Zakat of inventory to prevent the existence of doubts in measurement and to reduce the difference of opinions of the estimators. The results of the study are considered in touch with reality by using mathematical equations that facilitate the work of calculating Zakat, which are recommended to be adopted and considered as a criterion in accounting for the Zakat of companies.

Forest gardens increase the financial viability of farming enterprises in Sri Lanka

Forest gardens (FGs) are tree-dominant land uses in Sri Lankan farming enterprises. Although FG financial performance has been described, their overall contributions to farming enterprises remain unclear. This information is critical given the global quest for financially viable, sustainable agricultural models. Farming enterprises include On-farm (land uses: FGs, paddy, cash crops, plantations, swidden/chena plots, livestock), Off-farm (employment, trading, grants, welfare) and household components. Forest garden financial performance was compared with other enterprise components in short-(reference year, 2012–2013) and long-terms (beyond 2013). Financial data were collected for 85 farming enterprises in nine locations of the Intermediate zone using Household Income and Expenditure surveys and quantified using accounting procedures. In the short-term, 49% of On-farm income was the value of household consumption while 54% of On-farm expense the value of household contributions. FGs contributed 29% to food and fuelwood self-sufficiency, generated the highest profit, were the most financially efficient land use, and average FG profit (Current assets) was greater than enterprise profit. In the long-term, FGs had the highest number of timber and fuelwood species (biological assets). Their average net realisable value (NRV) was 90% of total NRV for biological assets from all land uses. Since FGs occupied 68% of the study area, their substantial biological and land assets had high Non-Current asset values. Average FG Non-Current asset values accounted for 79% of Total Equity and were farmers' core ownership interest in enterprises. Forest gardens increase the financial viability of farming enterprises. Their financial contributions warrant recognition in national economic performance assessments.

Specific Aspects of Recording the Impact of the Pandemic in the Accounting and Financial Reporting of Organizations

The spread of coronavirus infection, the resulting pandemic, and the subsequent economic crisis have had a significant impact on the accounting and financial reporting of Russian and foreign companies. Aim. The presented study aims to analyze the impact of the pandemic on the accounting and financial reporting of organizations. Tasks . The authors identify and classify areas of the financial and economic performance of organizations affected by the pandemic and examine methods for recording them in accounting and reporting in accordance with the requirements of the modern regulatory system in Russia and worldwide. Methods . The methodological framework of this study includes general scientific methods of cognition, namely observation, generalization, comparison, analytical assessment of the content of legal documents in the field of accounting and reporting. Results . Based on the principle of prudence, which should be ensured by the accounting policy of each organization in accordance with Russian Accounting Standard 01/2008, areas of the financial and economic performance of organizations affected by the pandemic are those with a negative impact. These areas are divided into three directions: increased operating costs (for ordinary activities and other expenses), decreased economic benefits gained from expenses incurred in the past (identification of onerous contracts), and uncertain future business environment (adjusting and non-adjusting events). While the overall increase of semi-fixed expenses of organizations during the pandemic may be compensated by a significant reduction in variable costs of the company's ordinary activities due to their reduced scope, cost-effectiveness associated with the execution of contracts concluded before the pandemic may be reduced in some cases. Adjustments in the estimated economic benefits relative to the costs of these contracts must be reflected in financial statements. In order to adequately reflect the future uncertainty of the business environment in the accounting records, it is necessary to use the professional judgment of persons responsible for the formation and presentation of these records to interested users. In the context of the pandemic, this judgment should be applied to the assessment of the going concern assumption, net realizable value, impairment of receivables, fixed assets and intangible assets, obligations under onerous contracts, etc. Conclusions . The methodology for recording the impact of the pandemic on the financial and economic performance of the organization in accounting has been sufficiently developed and enshrined in the current versions of international financial reporting standards. Depending on the circumstances specific to a particular organization, persons responsible for financial reporting should make professional judgments regarding various significant issues. At the same time, special care should be taken in this regard, because overestimating income and assets (or underestimating expenses and liabilities) can mislead interested users, and overestimating the created reserves (underestimating the value of assets, overestimating expenses and liabilities) can lead to an unfair decrease in the company's investment attractiveness. Information about such judgments should be fully disclosed in accordance with IAS 1 - Presentation of Financial Statements. According to Russian accounting law, federal and industry standards effective in the Russian Federation are based on international financial reporting standards, which means that these issues will need to be addressed when preparing interim and final financial statements of Russian enterprises in 2020.

Inventories Accounting under US-GAAP and IFRS Standards: The Differences That Hinder the Full Convergence

This study purposes of understanding the existing differences between US-GAAP and IFRS accounting treatments of inventory. Given the 2015 FASB update, aimed at simplifying and aligning inventory accounting with IFRS standards, the research explores the introduced innovations. More specifically, the study, starting from a literature review and standards analysis, designs a theoretical framework aimed at facilitating the understanding of the differences still existing between the two accounting principles. Different from the prior works, we focus on the complex determination of the net realizable value in the case of input (e.g., raw materials) write-down. In particular, we show how the net realizable value (NRV) changes according to the value taken as a reference. The results of this analysis suggest that, based on a prudential valuation logic, the replacement cost is the best estimate for NRV.

Accounting for certified emission reductions (CERs) in India

PurposeThe purpose of this paper is to analyse the certified emission reduction (CERs) disclosure and reporting practices followed by Indian firms.Design/methodology/approachThe study is based on all 131 Indian firms who received the CERs under the CDM of UNFCCC. The content analysis is being used to examine the recognition, measurement, presentation and disclosure of CERs within the financial statements.FindingsThe study found that there is generally no uniformity of accounting for CERs. The firms adopted a diversity of accounting practices. More specifically, majority of companies (40.46 per cent) recognised CERs as the other income; a very high non-disclosure rate (91.60 per cent) for valuation of CERs inventories was found as only four companies (3.05 per cent) provided accounting treatment for CERs inventories at lower of cost or net realisable value followed by three companies (2.29 per cent) accounted for these inventories at Net realisable value at the end of the reporting period; similarly, a very high non-disclosure rate (92.36 per cent) for how companies account for expenses incurred in earning these credits was found.Research limitations/implicationsThe study will be useful for a wide array of audiences ranging from accounting standard setter to the auditors. The present analysis is based on secondary data, as we examined only annual reports of the sample companies to know how they recognise their earned CERs within the financial statements. So, we did not cover the opinions of various key persons of companies like an accountant, auditors etc. which could be a limitation of this study in validating CERs disclosure practices followed by the Indian firms.Originality/valueTo the best of the author's knowledge, the present study is a first of its kind to analyse the carbon credit disclosure practices in the context of a developing country.

Do comparable accounting choices produce comparable net profit and equity Integrating the Gray's and Herfindahl H indices in measuring the comparability of Brazilian companies

The objective of this study was to determine whether industries with high comparability in 2009 net profit and equity also made comparable accounting choices in the adoption of IFRS, 2010 in Brazil. The sample consisted of 65 companies listed on BM&FBOVESPA. Eight items were identified to measure fair value and net realisable value and the Gray's and Herfindahl H indices were used to measure comparability among the 11 industries. The three measurements showed that none of the industries achieved high or material comparability. We found that adopting IFRS did not increase the comparability of Brazilian companies at first, nor did the comparability of figures in 2009 lead to lower dispersion of the policies adopted in 2010. However, no evidence was found to reject the null hypothesis that the averages of the residual values were the same. Despite advances in IASB convergence, substantial comparability problems remain, even within the same country.

A Alocação de Custos Conjuntos em Processos com Múltiplos Pontos de Separação na Refinaria Fluminense S.A.

The purpose of the Refinaria Fluminense S.A. case is to illustrate the operation of an oil refinery and the challenges that accountants and managers face in assessing the costs of oil products, evaluating inventories, ascertaining the results of refinery operations and analyzing decisions to continue processing individual products to increase their value added. It was designed for discussion in the subjects of Management or Cost Accounting in undergraduate and postgraduate courses in Accounting, Administration and Production Engineering. The narrative begins with information that shareholders are demanding that management take steps to increase the company's profitability. In analyzing the profitability of products manufactured and marketed, managers realize that they do not sufficiently understand the distribution and behavior of product costs. Convinced of the importance of this information, managers decide to hire a cost specialist who promises to solve their doubts and help them analyze the decisions they will have to make to meet the shareholders' wishes. Students are then asked to take on the role of the specialist and develop the proposed questions. One of the most relevant contributions of the case is that it provides the opportunity for students to confront the stylized textbook exposures with the conditions found in companies. This is particularly true in the case of the application of the net realizable value method in processes with multiple splitoff points, a case rarely commented on in the vast majority of books.

Analysis of Simplification of Accounting Initiative for Inventory and Update of Other Simplification Proposals

This article examines Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory. Through the accounting simplification initiative, the Financial Accounting Standards Board is reviewing areas of U.S. generally accepted accounting principles (GAAP) that can be simplified while still maintaining high-quality accounting standards. Under this new standard, companies will be required to value inventory using the lower of cost or net realizable value. Companies using the last-in, first-out (LIFO) and retail inventory methods will be scoped out of applying the new standard. © 2016 Wiley Periodicals, Inc.

Assets Impairment Testing: An Analysis of IAS 36

The primary objective of accounting is to provide information about the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events, and circumstances that change the resources and claims. It is therefore considered important to inform users of financial statement of any asset or cash generating unit that lose its capacity to recover its cost. This is necessary so as to provide accounting information users with relevant information about the change in value of the firm’s resources. An asset that loses its capacity to recover cost is said to be impaired and accounting for asset impairment is faced with a few challenges. It can be difficult to determine which measure of value should be used when assessing impairment. Options include current cost (replacement cost), current market value (selling price), net realizable value (selling price minus disposal costs), or the sum of the future net cash flows from the income-generating unit. More so, there is little guidance by IAS 36 on accounting for asset impairments: when to recognize impairments, how impairments should be measured and how impairment should be disclosed. Since assets impairment can distort the usefulness of accounting information for decision making, adequate attention should be made to ensure that the judgment and estimates made by managers are verified by auditing the estimates.Key words: Asset impairment, testing, IAS 36.

A modified single einwurf system for the refinery recovery house

A comparison of two recovery schemes – double einwurf and a modified single einwurf – was carried out to evaluate their economical performances. Models of both schemes were programmed including all the relevant material balances, process parameters, cost of utilities, and net realizable value of streams. Process parameters were determined experimentally for both schemes, for each type of centrifugation. Under imposed constraints and assumptions, results of the simulation showed the proposed modified single einwurf scheme is the preferred scheme for recovery house operation.

Inflation Accounting: More Questions than Answers

The sole responsibility of accounting is to present what has transpired within a given period through reporting not what should have occurred or will occur. Despite fitting correctly into the definition of reporting business event, historical cost accounting in recent times has come under heavy criticism of lacking behind economic trends due to the use of original cost. Historical cost accounting has been challenge on principles of uniform monetary measure and matching concepts. These growing dissatisfaction with historical cost accounting as a method of reporting financial statements has made it necessary to consider alternative method which is accounting for price level changes. Unfortunately, this alternative has not been put to practice due to its unattractiveness. It is against this background that this paper attempts to discuss some novel questions with recommendations about the existing inflation accounting methods. Aside the traditional disadvantages of inflation accounting, this article have critically examine the restatement of items under inflation accounting against basic accounting, economics and finance principles. In addition the novel questions have been raised on the consistency and rationale behind the treatment of certain items under price level changes accounting. The article argues that, inflation accounting is not only inconsistent with accounting principles but also with related subjects such as economics and finance. In practice inflation accounting creates illusionary or imaginary profit which does not exist, thus capital maintenance concept is just a paper theory because much of the profit under inflation accounting is unrealised or holding gain Inflation accounting distorts the basic objective of reporting what happen within a period or at specific time. The greatest deterrent to adoption of price level changes accounting is what it is not: inflation accounting is not present value, net realizable value, or current market values or fair value and therein lies much of the opposition to its use. In line with these questions, the article recommends that, inflation accounting can only be meaningful with new accounting system since the existing system is based on historical cost accounting.

Bases de medición:correspondencia entre lasNormas Internacionales deInformación Financiera, losEstándares Internacionalesde Valuación y el contextoactual colombiano

The International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) are a key factor in the internationalization process of the markets, leading to guaranteeing common information as support for the raising of capital. A very important factor in the preparation of the report is the accounting basis. Measurement basis such as fair value impose great valuation challenges, especially for economies in which the markets are not deep and developed enough. Thus, the measurement requirements call for quality valuation processes that minimize any possible distortion of the value; an opportunity for the International Valuation Standards, without a doubt. Based on the definitions of the IASB, the International Valuation Standards Council (IVSC) and the current Colombian principles on measurement basis, there is a stronger link between the fair value definitions of the IFRS, the definition of market value of the IVSC, and the definitions of net realizable value, fair trade value, commercial value, market value and opportunity cost of the Colombian principles. In turn, the definitions with a weaker link are amortized cost, special value and fair value of the IVS.

Book Reviews

Book Reviews

DEVELOPMENT OF BEEF RAISING PRODUCT MANUFACTURING ON THE INNOVATIVE BASIS

In terms of agricultural sector, reformation of beef production is necessary, in order to reduce livestock output and the concentration of production. In accordance with this, in the period between 1990 and 2010, cattle production in all parts of the Chernivtsi region decreased by 331.7 thousand units, or 74.0%. The main reason for this negative trend is the unprofitable beef production, which is primarily due to the low animals' productiveness, net realizable value of live weight and its high cost. In order to solve the strategic tasks of beef breeding it is necessary to support the innovative activities of scientific and technological progress and innovative organizational economic reforms in agriculture. The priorities concerning innovative processes in this field are connected with the improvement of cattle’s quality and species composition, production of food and feeding systems for the cattle, the usage of power-saving technologies that take into account beef raising reproduction peculiarities and make it possible to improve efficiency and competitiveness of agricultural field.