11-02-2003, 02:15 PM
Hi
I agree with pervez in principle.
However, the situation under consideration was different and needs a differnt approach the company incurred losses. hence cost is greater than NRV. IF cost is greater than NRV then NRV is the appropriate valuation policy and is a disclosable matter in the accounting policy note.
Wine example Value of wine increase with time, therefore, NRV is greater than the cost. Hence cost is taken as that valuation. ie, unrealised gains are not administered. but the standard clearly says if there are unrealised losses, they are administered as soon as we become aware of them and the existance of losses is a wake up call. Even in wine if there is a sudden downturn in market say, i mean just as an example, if it is discovered that all the wine in the world is contaimnated, then wine is not salable item, cost is greater then NRV and hence NRV (based on future selling price) is taken as basis of valuation. hope it clears the matter.
To be quite honest, there is nothing in your message that I disagree with but the scanerio under discussion was different due to the existance of losses.
Thanks
zubair
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I agree with pervez in principle.
However, the situation under consideration was different and needs a differnt approach the company incurred losses. hence cost is greater than NRV. IF cost is greater than NRV then NRV is the appropriate valuation policy and is a disclosable matter in the accounting policy note.
Wine example Value of wine increase with time, therefore, NRV is greater than the cost. Hence cost is taken as that valuation. ie, unrealised gains are not administered. but the standard clearly says if there are unrealised losses, they are administered as soon as we become aware of them and the existance of losses is a wake up call. Even in wine if there is a sudden downturn in market say, i mean just as an example, if it is discovered that all the wine in the world is contaimnated, then wine is not salable item, cost is greater then NRV and hence NRV (based on future selling price) is taken as basis of valuation. hope it clears the matter.
To be quite honest, there is nothing in your message that I disagree with but the scanerio under discussion was different due to the existance of losses.
Thanks
zubair
<center></center>
