AC2101 S1 2014 Seminar 2.pptx

Lump sum of 1m 10 years from now 3 ordinary annuity

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Unformatted text preview: or OCI 15 FRS 113 – Fair Value Measurement §༊  Objective §༊  Defines FV §༊  Sets out a framework for measuring FV in a single IFRS §༊  Requires FV measurement disclosures FRS 113 paras 90- 99 16 8 Clicker Question Is transaction price always equal to fair value then? 1.  Yes 2.  No 17 Up till this point, we’ve been covering the GAP in the STATEMENT OF FINANCIAL POSITION… §༊  Is there also a GAP in the INCOME STATEMENT? §༊  Understand Accounting Income and Economic Income §༊  But before that…time value of money (i.e., computation of present value) 18 9 Time Value of Money The time value of money means that all things being equal, it is better to have money now rather than later. Rationale: Like other commodities, money is a scarce resource. Receiving the same amount of money later rather than now involves forgoing interest income that could been earned during the intervening period. 19 Time Value of Money Given the time value of money, a dollar is worth more today than it will be worth tomorrow given its capacity to earn interest. Discounting is the method used to figure out how much future payments are worth today (i.e., their present value). 0 1 2 3 4 5 Time $1 $1 $0.75 Interest rate = 10% $0.62 20 10 Present Value (PV) of a Single Sum PV of a single sum represents the value today of a single sum to be received or paid at a future time. Formula: PV (Single sum) = Future $ 21 Present Value (PV) of an Annuity An annuity is a series of payments of equal amounts. PV of an annuity: §༊  sometimes called PV of an...
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This document was uploaded on 02/10/2014.

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