Contribution of Asset by Owner

[Seamus Wong]

What are the key points that we need to include when talking about why we use the AGREED value as opposed to the HISTORICAL cost when an asset is contributed to the business by the owner?

[jnlfs2010]

QCs- Faithful representation, Relevance
Assumptions- Entity

This is for noncash assets like vans and stuff.

1. accurate representation of economic benefit to be received by the business (faithful representation) and ensure assets are not overstated and nor is the owner's equity (some may have been consumed by the owner). This is done by comparing similar assets in the market of similar use and age
2. This valuation represents the economic benefit to be received by the business which is more relevant for decision making and will better assist decision making for the BUSINESS
3. The cost price is relevant to decision making for the owner and not for the business. We are accounting for the business which is a separate entity, therefore the fair value is used

[I'm not perfect if I make any mistakes or are insufficient please do correct me]

[Seamus Wong]

QCs- Faithful representation, Relevance
Assumptions- Entity

This is for noncash assets like vans and stuff.

1. accurate representation of economic benefit to be received by the business (faithful representation) and ensure assets are not overstated and nor is the owner's equity (some may have been consumed by the owner). This is done by comparing similar assets in the market of similar use and age
2. This valuation represents the economic benefit to be received by the business which is more relevant for decision making and will better assist decision making for the BUSINESS
3. The cost price is relevant to decision making for the owner and not for the business. We are accounting for the business which is a separate entity, therefore the fair value is used

[I'm not perfect if I make any mistakes or are insufficient please do correct me]

Thanks a lot, I think you covered most of what is necessary