Question one
The benefit of the historical cost accounting is that the cost is known and can be easily checked in the invoice (Lal 696). In most cases the cost of the products is in the form of contracts transfer taxes, and payments. This perceived benefit relates to the hierarchy of the accounting qualities in that it is objective (Lal 696). This benefit ensures that the various reports of the financial position of an enterprise is accurate and can be verified easily by the lone documentary evidence. This historical cost accounting is related to the qualities that are mentioned in the qualities of the accounting qualities, which are covered in chapter two of the textbook. This benefit of the historical accounting helps the company to work towards the objective of being objective in the financial statements.
The fair value accounting is necessary because it gives actual liability and asset assessment on the ongoing basis of the users of the reported financial information of a firm (Schmidt 180). When the price of the asset or the liability increases then the company will mark up the value of the responsibility or the asset. The markup of the cost will help to predict when it will receive if it sells the asset or when to pay to relieve itself from the liability (Schmidt 180). This benefit is important because it helps the company in predicting the future financial statement of the firm. In the hierarchy of the accounting qualities, the advantage relates to the reliability. The consistency of the accounting information is important because it is reliable because it gives the precise liability and assets of the enterprise.
The historical accounting may be misleading to the users in the situation in which the values of the non-current assets used in the company are out of date. Furthermore, the non-current assets become out of date quickly. This situation makes most of the entities to have misleading financial statements at the end of the fiscal year.
Question two
FASB issued the accounting standard that eliminates the concept of the extraordinary and the unusual items on January 2015.
The investors and the stakeholders introduced this specification with the aim of reducing the complexity in the various accounting standards updated in FASB. The standard was introduced with the aim of evaluating, improving, and identifying the areas that are accepted by the accounting principles. The stakeholders and the investors updated the standard to help in clarifying the issues of the unusual nature to underlay the transaction to possess the high degree of the abnormality.
The stakeholder and the investors also argued that this ASU does not influence the disclosure management for the deal, which is very unusual. The updated information is valuable because it eliminates the presentation of the various extraordinary items in various entities. The disclosures of the unusual and extraordinary items of the income taxes are applicable in the earnings per share of the information and the unique products with the aim of computing them in the notes of the financial statements.
Question three
The ASC topic number that deals with the presentation of the income statement is number 225.
The ASC subtopic number that deals with the extraordinary and the unusual items is number 20.
Works Cited
Lal, Jawahar. Cost Accounting. New Delhi: Tata McGraw-Hill Pub, 2002. Print.
Schmidt, Andreas. Fair Value Accounting and the Financial Market Crisis: To What Extent Is Fair Valuation Responsible for the Financial Crisis?Berlin: public GmbH, 2014. Print.
