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Residual Method to Value Acquired Assets Other Than Goodwill, Article Review Example

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Words: 505

Article Review

The modern concepts of business have also given birth to the emergence of modern principles of accounting. Among these principles are those that are designed to determine the different pros and cons of international business operations and growth options. One of these principles includes the utilization of the residual method to value acquired assets other than goodwill. This principle implicates that the emergence of intangible assets could be considered as solid business assets if they are recognized as part of the contractual or legal rights of the business. Although they may be considered indistinguishable from other business assets, it is their capability to affect the overall operation of the business that makes them recognizable.

Another principle to give attention to is that nature of host contract relating to hybrid financial instrument issued in the form of share under FASB statement no. 133. In this statement, it is clarified that when a financial instrument is issued as a form of share, it should be recognized along with the value and risks it possesses. Evaluating the value of the said share shall depend on whether it is an equity instrument or a debt instrument, thus pointing out how it may relatively affect the overall operation of the business.

When it comes to the law of leasing, the lessor consideration of third-party residual value guarantees principle insists on the manner by which a third party may be involved in a lessor-agreement. When such instances are present, it is important to point out that the rights and the position of the lessor must be clear enough to determine the values that might be given to the third party. The percentage of share the third party gets must be outlined clearly to avoid any disturbances and disagreements in the future. The same thing is true when the idea of determining escrowed share arrangements and the presumption of compensation comes into account. In this case, it is insisted that the substance of arrangement should be given proper light and attention for it to be clear enough for application in business. When shared arrangements are established, proper attention to details must be considered accordingly. Newly issued securities should also be added into the agreement blueprint to make sure that the values of each other are protected accordingly.

Through the determinable application of these principles in modern accounting, it s assumed that the recognition of values between allied parties and allied companies that intend to operate hand in hand in the feat of international business alliance. With the proper assumption of values based on such principles, avoiding distinct problems that occur especially in consideration with business growth and acquisitions could be given particular attention and care.

References

Use of the Residual Method to Value Acquired Assets Other Than Goodwill. (September 29-30, 2004).

Determining the nature of Host Contract Related to a Hybrid Financial Instrument Issued in the Form of a Share under FASB Statement No. 133. (March 15, 2007).

Escrowed Share Arrangements and the Presumption of Compensation. (June 18, 2009).

Lessor Consideration of Third Party Residual Value Guarantees. (May 15, 2003).

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