A trainee accountant has been reading some literature written by a qualified surveyor on the values...
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A trainee accountant has been reading some literature written by a qualified surveyor on the values of leasehold property located in the area where Toogood owns leasehold property. The main thrust is that historically, annual increases in property prices more than compensate for the fall in the carrying amount cause by annual amortisation until a leasehold property has less than 10 years of remaining life. Therefore, the trainee accountant suggests that the company should adopt a policy of carrying its leasehold properties at cost until their remaining lives are 10 years and then amortising them on a straight-line basis over 10 years. This would improve the company's reported profit and cash flows as well as showing a faithful representation of the value of the leasehold properties. Required Comment on the validity and acceptability of the trainee accountant's suggestion. A trainee accountant has been reading some literature written by a qualified surveyor on the values of leasehold property located in the area where Toogood owns leasehold property. The main thrust is that historically, annual increases in property prices more than compensate for the fall in the carrying amount cause by annual amortisation until a leasehold property has less than 10 years of remaining life. Therefore, the trainee accountant suggests that the company should adopt a policy of carrying its leasehold properties at cost until their remaining lives are 10 years and then amortising them on a straight-line basis over 10 years. This would improve the company's reported profit and cash flows as well as showing a faithful representation of the value of the leasehold properties. Required Comment on the validity and acceptability of the trainee accountant's suggestion.
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Related Book For
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey
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