What is the accounting of the cost of reimbursement?

Accounting costs for exchange is an accounting concept that focuses on the valuation of assets and liabilities for the price that the company pays for exchange of item. This changes the traditional accounting method from the valuation of these items to historical value, which is what the company originally paid for buying an item and location into operation. Accounting of costs will try to eliminate distortion in the company's financial statements regarding the actual value of the assets and obligations of the company. Traditional accounting standards would require the Company to record an asset for the original purchase price, to determine the value of asset rescue and calculate the monthly depreciation from the difference between the two numbers would require the company to record the asset for the original purchase price to record the asset, the depreciation of assets. The balance sheet would reduce the historical value of the asset (ie the original costs) and introduced the actual value of the asset in the financial statements. While this concept worked theoretically, historical costs do not represent what the company paysFor the purchase of another item to replace the original as required by the accounting of the replacement costs.

Accounting of fair market value is a similar accounting of compensation costs, but has significant differences that also distort the funds of the company. As part of the accounting with real market value, assets must be re -evaluated at different times during the year to the value for which the company could sell the asset in the open market. The problem is that the value that the company could obtain by selling an asset is not necessarily translated into the amount that the company pays for the item and creates further distortion.

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cost of alternative costs will try to exterminate these differences by the company to appreciate assets - in specific time periods, similar to accounting with the real market value - for the actual cost of exchange of assets. The biggest jesu here is how exactly to be responsible for the changes worthy ofOta asset. Accounting rules for reimbursement accounting require companies to obtain profits or losses of revaluation of assets and recognize them as extraordinary profits or losses in profit and loss statement. Although it is advantageous for assets that rise value, declining values ​​can drag the company's accounting income and the Business Party of Rile.

Depreciation changes according to accounting rules Replacing due to changing asset value. Higher values ​​will allow companies to depreciate the asset in detail, which can help reduce the extraordinary profit reported in the profit and loss statement. Assets with decreasing value usually do not provide any depreciation doses because these amounts are already in the profit and loss statement.