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Reporting results (Accounting concepts (Accruals (Income and expenses are…
Reporting results
Accounting concepts
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Cost
A business asset should be recorded in the financial accounts at the cost when it was purchased, not its current value, because it is rare that two people will agree on the current value of an asset One problem of historical cost is that it ignores any increases in value due to inflation
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Accounting standards
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For trading companies, move away from historical cost towards 'fair value'.
Investment companies, including financial product providers, have prepared accounts using market value of assets (or a proxy for it) for many years,
Means revaluing A and L at end of each accounting period. Gains and losses on revaluation should be included in that period's income statement.
A consequence of this, for a financial product provider, is volatile results if the A and L do not move consistently
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