Teori Akuntansi Positif

Accounting Under Ideal Conditions

Lydia Melissa Hadinata
(121110032)
What are ideal conditions?
1. Complete relevance and reliablility.
2. Information faithfullu represents economic value of the company.
3. Perfect asset valuation and income measurement.

Present Value Model Provides most relevant information to users of financial statements
Present Value Model Under Certainty
Certainty: future cash flows of a firm and the economys interest rate are publicly known
which can also referred to as ideal conditions
- NBV of capital asset at any year-end = PV
- Accretion of discount is also referred to as ex ante or expected net income
Since all conditions are certain,
expected net income = ex post or realized net income

The ideal conditions, market value is equal to the net present value.
-

Relevant financial statement information gives information about the firms future economic
prospects (Future dividends = payoff to investors)
Dividend irrelevancy: under ideal conditions, the timing of dividends will not affect
the PV. Cash flows are also relevant
Therefore, the prior financial statements = relevant
- Net income does not play a role in firm valuation under ideal conditions
- Information that represents what it intends to represent is reliable
-

Financial statements are reliable under ideal conditions since cash flows and
interest rate are known with certainty

Any calculation errors would immediately be discovered

- Under ideal conditions,

PV of asset/liability = market value
o

Arbitrage: making profits in one market and selling in another market with
identical goods and services

- Market value of the firm = sum of financial assets and PV of joint future receipts from its
capital assets + intangibles PV of liabilities
Present Value Model Under Uncertainty
Important to consider the potential for different states of nature of the economy and how they
affect cash flows.
These states are objective, publicly known, and observable
1. Financial Statement information is still completely relevant and reliable.
Relevant: Balance Sheet values are based on expected future cash flows, and dividend
irrelevancy holds
Reliable: ideal conditions ensure that present value calculations faithfully represent firms
expected future cash flows
2. Two ways of calculating balance sheet current values

Value in use

Fair Value

3. Income statement lacks information content when abnormal earnings do not exist

Investors have sufficient information to calculate realized net income

Net income is predictable conditional on the state of nature

4. Consider all state probabilities to be objective at this point in time

Subjective probabilities eliminate the existence of ready-made probabilities

No guarantee of equivalent frequencies of potential states in two-period

economy with subjective probabilities

Revenue Recognition Accounting (RRA) Current value model when ideal conditions do
not exist.
-

SFAS 69 applies to publicly traded oil and gas companies

o

Requires management judgment in determining proved reserves

Revenue recognized when reserves are determined to be proved

Set discount rate of 10%

Adjustments to estimates in present value calculation are required

National Instrument 51-101

o

Canadian reserve recognition accounting standard

Requires a report by an independent Qualified Reserves Evaluator or

Auditor

Requires (constant and forecast) price disclosure

Which is better for investors?

Current Value Accounting

History does not repeat itself

exactly
Current value of assets/liabilities =
best indicator of future prospects
Income statement explains the
changes in assets/liabilities
Balance Sheet assumes greater
importance

Historical Cost Accounting

Past performance is the best
indicator of future performance
Accomplished revenues represent
solid foundation for future earning
Statement of Earnings is the most
important
Balance Sheet used to report
asset costs matched against
revenues it generated