Question

a) Zhang are thinking of investing in a Scottish company called Tartanus next year. Discuss what difficulties might they face integrating Tartanus into the Zhang Group

b)Critically evaluate the extent to which replacement cost, realisable value and economic value offer realistic alternatives to historical cost.

Answer 1

Zhang are thinking of investing in a Scottish company called Tartanus next year. Discuss what difficulties might they face integrating Tartanus into the Zhang Group – While before investing any Scottish base company , Zhang company needs to review following key point :

1. Political Wrangling- Brexit and possibly Scottish Independence will ultimately prove the best in the Long run , both are undoubtedly focus from fundamental issues that are undermining the economy .At present there are no straight forward exit from Europe , nor potentially from the UK .
2. Education – Employer repeatedly report that too many Young people coming into work and do not have skill required in a rapidly changing marketplace . At present , employer filled up place with recruitment from abroad but with the uncertainty surrounding in brexit , it remain unclear how accessible this pool of resources in future

Critically evaluate the extent to which replacement cost, realisable value and economic value offer realistic alternatives to historical cost.

At present , under IFRS system of accounting company have to follow fair value of concept instead of Historical concept . So gradually historical cost concept will lose their value.

Against of Replacement cost – based on out of date measurement, ignore unrealised gain, Measures some key assets and Liabilities at zero .

Where as replacement cost attempts to place a realistic value on the asset of a company . Replacement cost asks the Question ?? What would it cost to replace the existing business asset with identical , equivalent asset of today’s price . Replacement cost is an alternative method of measuring the assets and profits of the business.

Realizable Value – Asset realisable value mean the amount for which it could be sold and a liability realisable value mean is the amount for which it could be settled .Realisable value is measured at Net basis.

Reliability- Reliable when based on active markets or actual realization . Relevance for –shows sales value ( net) and therefore opportunity cost . Shows expected value of risk adjusted future cash flow of some assets

Economic value- This value represents the measurement of the benefit derived from a goods and services to an Individual or a company. Economy value might be higher than market value because economic value can also be the maximum price or amount of money that someone willing to pay for goods and services

If the price of the product rises significantly , individual might no longer but the product leading to decline in it economic value . As a result the producer of the product might lower prices since the lower economic value has to lead to a decline in sales of the product .

A company might determine the economic value of its products to help set prices and forecast demand it .