06-20-2006, 01:22 AM
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by insaan</i>
let me take an example;
date today is 19 june 2006
today we buy an asset for Rs 1000/- & its useful life is 10 years
today,a similar asset,fully depreciated, which also had a useful life of 10 yrs has current market value RS 100/-
means residual value of our new asset purchased is RS100/-BUT isn't this amount in present value terms.Means say after 10 yrs on 19 june 2016 the asset is sold for RS 250/- infaltion being about 10%.
If this is so then y do we calculate present value of Residual value and subtract it from cash price in computation of lease rentals.We should have directly subtracted residual value from cash price and computed rentals
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Let me make you clear regarding one thing.
"Specific prevails over general"
Keeping in view the aforesaid statement, tell me why do we classify 'advances received from customers as liability? As this doesn't meet the definition of liability given in Framework to the IFRSs and IAS 1. According to the definition of liability we should have calculated the cost of services to be provided to customers against the advances recevied and should have shown as liability according to the definition of liability. Since its the specific requirement of IAS 18, so we will have to classify the whole amount as liability. However, to eliminate this contradiction within standards it is highly probable that in upcoming revision of standards this contradiction shall be harmonised.
If IAS 17 specifies its own treatment for leases then it has nothing to do with IAS 16. Moreover, when we calculate present value of residual amount in case of IAS 17 we also have to calculate present value of all rentals inorder to calculate MLP (Minimum Lease Payment). And the new treatment given by IAS 16 is just to simplify as the residual is usually not so material and you may have read in IAS 1 the Standards do not apply upon immaterial things.
Further more, if you pick up the real life example you will not find any material difference b/w the residual value calculated according to IAS 16 & 17. As the other calculations of IAS 17 are also in PV so thats why the treatment of both standards r different.
Hope it clarifies
ICAPians, the unparalleled..
let me take an example;
date today is 19 june 2006
today we buy an asset for Rs 1000/- & its useful life is 10 years
today,a similar asset,fully depreciated, which also had a useful life of 10 yrs has current market value RS 100/-
means residual value of our new asset purchased is RS100/-BUT isn't this amount in present value terms.Means say after 10 yrs on 19 june 2016 the asset is sold for RS 250/- infaltion being about 10%.
If this is so then y do we calculate present value of Residual value and subtract it from cash price in computation of lease rentals.We should have directly subtracted residual value from cash price and computed rentals
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Let me make you clear regarding one thing.
"Specific prevails over general"
Keeping in view the aforesaid statement, tell me why do we classify 'advances received from customers as liability? As this doesn't meet the definition of liability given in Framework to the IFRSs and IAS 1. According to the definition of liability we should have calculated the cost of services to be provided to customers against the advances recevied and should have shown as liability according to the definition of liability. Since its the specific requirement of IAS 18, so we will have to classify the whole amount as liability. However, to eliminate this contradiction within standards it is highly probable that in upcoming revision of standards this contradiction shall be harmonised.
If IAS 17 specifies its own treatment for leases then it has nothing to do with IAS 16. Moreover, when we calculate present value of residual amount in case of IAS 17 we also have to calculate present value of all rentals inorder to calculate MLP (Minimum Lease Payment). And the new treatment given by IAS 16 is just to simplify as the residual is usually not so material and you may have read in IAS 1 the Standards do not apply upon immaterial things.
Further more, if you pick up the real life example you will not find any material difference b/w the residual value calculated according to IAS 16 & 17. As the other calculations of IAS 17 are also in PV so thats why the treatment of both standards r different.
Hope it clarifies
ICAPians, the unparalleled..
