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Essay / Research Paper Abstract
This 5-page paper covers the FASB Concept Statement 7, which details fair value of cash flows. Issues discussed include the basis of the concept, what was done prior to the concept and whether this statement is a good method by which to measure fair value.
Page Count:
5 pages (~225 words per page)
File: D0_MTexcafl.rtf
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Unformatted sample text from the term paper:
information to answer these questions has been obtained from one source, the Financial Accounting Standards Boards newsletter, Understanding the Issues, May, 2001, Volume 1, Series 1. This document can be
located online at http://www.fasb.org/articles&reports/UI_vol1_series1.pdf. The board, incidentally, first introduced its Concepts Statement 7 (involving impairment of long-lived assets and asset removal obligations) during February 2000.
a. What was the method used prior to Concept Statement 7? The FASB has noted that Concept Statement 7 is somewhat different from the FASB boards conceptual
framework, as the Concept Statement focuses more on measurements to determine cash flow than does its predecessors. Basically, Concept Statement 7 focuses both on a single objective for measurements on
initial recognition, and for following fresh-start measurements. On the latter, however, the goal here is to limit it to measurements employing only present value.
In addition, Concept 7 "introduces techniques and ideas that have not been a common part in an accountants toolkit." Regardless, the issues in Concept 7 arent necessarily new -
according to the FASB, these concepts have been found in accounting literature as far back as the 1970s, and even prior to that, to the 1950s and before.
Before introduction of Concept Statement 7, accounting pronouncements relied on the term "best estimate" when it came to describing the target for estimate cash flows.
"Best estimate" was implied to mean unbiased, in a range of possible outcomes, the most likely amount and a single amount or point estimate. Yet when it comes to accounting
(or any other field, for that matter), "best estimate" is simply too vague and isnt specific enough to measure cash flows precisely. b.
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