Accounting for Business Decision Evaluation Comprises

Question: Describe about the Accounting for Business Decision for Evaluation Comprises. Answer: Fair Market Value of Patent Comprehension of the value of the patents along with the valuation of many other tangible as well as intangible assets offer an appropriate representation of the total worth of an organization (Henderson et al. 2015). The financial evaluation comprises of the development of different assumptions as well as valuation models that are necessary for the determination of the fair value of the patent. Enumerations of the present value (PV) of the patent Present Value of Patent: 1st year cash flow: (PV of 100+PV annuity of 800) of 8% = $778,463,000 2nd Year Cash Flow: PV of 100 for 10 yrs 8% =$671,008,000 As rightly indicated by Horngren et al. (2012), there is a fundamental supposition that the higher the fair value the better it will be. However, AASB 13 explicates illustratively the overall fair value dimension (Australian Accounting Standards Board (AASB) - Home. 2016). As rightly mentioned by Henderson et al. (2015), the fair value reflects the overall estimated value of all the assets along with liabilities of a acquired business that can be applied with the intention of combining the financial declarations of the company. Again, the fair value can be effectively a market-based calculation and is not a business unit particular procedure of calculation. In accordance to the principles stipulated under AASB 13, the benchmark refers to the fair value as the specific price (Australian Accounting Standards Board (AASB) - Home. 2016). This price can be acquired from selling different asset and at the same time paid for transfer of liability (Liu and Kuang 2014). However, this can be regarded as an organized system between diverse markets participants recorded during the date of enumeration (Australian Accounting Standards Board (AASB) - Home. 2016). Consequently, higher price is considered comparatively better. As a result, the present supposition that mentions that higher fair value is better can be considered accurate (Henderson et al. 2015). Hence, as per the supposition of the present study, the higher present value of the patent can be taken into account. The present value of the cash flow for the first year is enumerated to be $778463000 and the present value of the cash flow for the second year is calculated to be $671,008,000. Therefore, as per the assumption the higher present value of the patent can be taken into account for the present case that in turn amounts to $778,463,000. References Australian Accounting Standards Board (AASB) - Home. (2016).Aasb.gov.au. Retrieved 14 September 2016, from https://www.aasb.gov.au Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015.Issues in financial accounting. Pearson Higher Education AU. Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., 2012.Financial Accounting. Pearson Higher Education AU. Liu, Y. and Kuang, Y., 2014. The Establishment of Management Accounting System in Administrative Institutions.Journal of Accounting and Economics,2, p.003.