When Comparative Information Must Be Restated In Segment Reporting

IFRS 8- Operating Segments is primarily a disclosure standard and is particularly relevant for large organizations that operate in different geographical locations and/or in diverse businesses. Information about an entity’s segments is relevant to assessing the risks and returns of a diversified or multinational entity where often that information cannot be determined from aggregated data. There are a few circumstances in which comparative information must be restated or otherwise taken into account. (a) If an operating segment was a reportable segment for the immediately preceding prior period but is not …

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Disequilibrium In The Balance Of Payments Of A Country

It is evident that balance of payments is always balanced just like balance sheet of a business concern. The current account may be understood as the income and expenditure account or the profit and loss account of a business concern. Any surplus or deficit in the current account is shown in the capital account to make the latter balance. The difference of total receipts and payments must tally with the surplus or deficit in the current account. In this way, the capital account shows as to what the country owes …

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Difference Between Balance Of Trade And Balance Of Payments

Balance of trade and balance of payments are two important terms in international transactions but both are not the same. To make the two terms clear, I shall first explain the two terms and then make difference between Balance Of Trade And Balance Of Payments. Balance Of Trade : Trade, in general connotation, means the purchase and sale of commodities. In international trade, purchase and sale are replaced by imports and exports. The balance of trade, thus, denotes the difference of imports and exports of merchandise of a country during …

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How To Identify The Acquirer In A Business Combination

How To Identify The Acquirer In A Business Combination? The key criterion, in identifying an acquirer is that of control. This term is the same as that used in IFRS 10 Consolidated Financial Statements for identifying a parent–subsidiary relationship. Control of an investee is defined as existing when ‘the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee’. In some situations, it is very easy to identify an acquirer. For …

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How To Identify A Business Combination

How To Identify A Business Combination? Obtaining control over the net assets of another entity could be achieved by one entity acquiring the shares of another entity on the open market and, because of the quantity of shares acquired, being able to control the financial and operating policies of the other entity. Accounting for this form of business combination requires the application of the associated principles but the application further involves the preparation of consolidated financial statements. A business combination could also occur without any exchange of assets or equity …

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Various Methods Of Brand Valuation

Brand is an intangible asset to a company. But all companies do not have a unique valuation method. Following four brand valuation methods are commonly available to a company which they practice. Various Methods Of Brand Valuation (i) Cost Method (ii) Discounted Cash Flow Method (DCF) (iii) Earning Multiple Method (iv)Premium Pricing Method (i) Cost Method:     The cost method to brand valuation assesses the value of an asset by determining its replacement cost i.e. cost of  receiving equal future benefits from an alternative asset. Under this valuation approach, total …

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Advantages And Disadvantages Of Using EBITDA

EBITDA which is Earnings Before Interest, Taxes, Depreciation and Amortization, is a measure of a corporation’s financial performance. It indicates a corporation’s financial performance by calculating earnings from its core business operations, without considering the effects of capital structure, tax rates, depreciation and amortization policies. EBITDA is an approximation for cash flow. It ignores many factors that affect the true cash flow, such as debt payments. EBITDA could be helpful for evaluating corporations in the same industry with widely different capital structures, tax rates, and depreciation and amortization policies. How …

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Tobin’s Q Theory And Its Usefulness In The Investment

Tobin’s Q was developed in 1968 by James Tobin. Tobin’s Q is a ratio which compares the value of the stocks of a listed entity in the capital market with the value of its equity book value. Usually Tobin’s Q was applied as a method for predicting investment behavior. Tobin’s Q compares the market value of a entity with the replacement cost of its assets. It uses the ratio (Q) to predict the investment decisions of the entity. It is independent of macro-economic conditions such as interest rates. The replacement …

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Approaches To Valuation Of Target Companies For Mergers

Before a merger takes place, the acquirer should value the target company correctly. Generally, there are four primary approaches to Valuation of target companies for mergers. These valuation approaches are as under : (1) Asset Based Valuation Approach :— Asset based valuation approach assumes that the value of a target company is the sum total of the value of its individual assets. Based on this valuation approach, either of the three methods, i. e a) Book value method, (b) Reinstatement value method, (c) Liquidation value method – is used for …

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Concept Of Cost Based Approach Of Brand Valuation

The actual sum of money spent to create a brand is analyzed under the cost based approach of Brand Valuation. This is a valuation approach that estimates brand value based on the cost incurred to create the item. It is not easy to segregate and compute all historical expenses incurred in creating the brand but it is often possible to identify external marketing expenditures including promotional expenditures. The subsequent task is to adjust these expenditures for inflation. This valuation approach is often a greatly conservative estimate of the brand value …

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