Measurement Bases

Conclusion 1: Chap 4 Economic Valuation (Alexander, Britton & Jorissen 2011) The Economic Income (as per defined by Fisher (1930) and Hicks (1946)) is ideal income or unrealistic. As far as accounting is concerned, Economic Income is unattainable even though theoretically sound, but it is highly subjective (due to timing, amount, and discount rate).

Conclusion 2: Chap 5 Current Entry Value (Alexander, Britton & Jorissen 2011) Business Income is also criticised because: Unrealised gains should not be included (or else lack of prudence) All holding gains need to be retained in the business to enable it to replace resources as they are used. Under current entry value system, profit recorded should consist of operating profit alone. Holding gains represents reserve Income (within capital maintenance requirement) excludes ALL holding gains.

Chap 6 Current Exit Value (Alexander, Britton & Jorissen 2011) Realisable Income NRV = Sales proceeds Disposal expense Market value (the internationally accepted definition IVSC): The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Fair Value: Fair Value: the price to sell an asset or transfer a liability in an orderly market by an arms length transaction. Fair value represents a hypothetical transaction that in many cases is difficult to measure. It represents the selling price of an asset or the payment price of a liability. It DOES NOT represent the price of acquiring the asset or assuming the liability. In practice, the potential selling price of equipment used in a factory or an investment in a private company for which no ready market exists may not be easy to determine. The amount by which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. A definition similar to, but not the same as, market value. In simple terms, it has been argued that market value would not include an alternative use value whereas fair value could. Thus fair value for investment property is would normally be market value but fair value for owner-occupied property will need more clarification on the assumptions underpinning the valuation.