Current Value Accounting

Current Value Accounting and Its Influences on Accounting Environment

Wei Cui

Abstract

Current Value Accounting is one of the hot spots of accounting researches. Three prevailing current value accounting methods are present value method, current entry price method and current exit price method. All these methods aim at adjusting the book value of assets and liabilities so that the information will not be distorted by the changing prices. The theoretical roots of these methods are similar and they can be taken as options to deal with the issue of capital maintenance and income recognition under a changing price environment. It is found current value accounting affects accounting environment greatly in aspects of standard setting, financial analysis and academic researches. However, it is not the right time for current value accounting to dominate the accounting practice due to several weaknesses of it. It is recommended to mix present value method, current exit price method and current entry price method together as an organic entity to improve the adoptability of current value accounting.
Index

Introduction 1
1 The Prevailing Current Value Accounting Methods 1
1.1 Present Value Method 1
1.2 Current Entry Price Method 2
1.3 Current Exit Price Method 3
2 The Theoretical Roots of Current Value Accounting 3
2.1 Changing Price Environment 3
2.2 Capital Maintenance 5
2.2.1 Concepts of Capital Maintenance 5
2.2.2 A Capital Maintenance Model 6
2.3 Motivation of Income Measurement 8
3 The Influences of Current Value Accounting on Current Accounting Environment 9
3.1 The Effects on Australia Accounting Standards 9
3.1.1 Non-Financial Assets Valuation 10
3.1.2 Financial Accounts Evaluation 11
3.2 The Uses of Current Value Accounting Information in Financial Analysis 12
3.2.1 Improving the Effectiveness of Decision Making 12
3.2.2 Supporting Information Users in Financial Industries 13
3.3