Discuss this statement,'Property,Plant and Equipment held by the fund for its intended use in the operation of the fund and not for sale or investments should not be measured at net market value'.

Question

Quizplus · Accepted Answer

The Answer is The statement "Property, Plant and Equipment held by the fund for its intended use in the operation of the fund and not for sale or investments should not be measured at net market value" is in line with the generally accepted accounting principles (GAAP) and the International Financial Reporting Standards (IFRS).

Property, Plant, and Equipment (PPE) are long-term assets that are used in the production or supply of goods and services, for rental to others, or for administrative purposes. These assets are not held for the purpose of resale and are expected to be used for more than one accounting period. As such, they are not considered to be held for investment or for sale.

According to accounting standards, PPE should be initially measured at cost, which includes all costs necessary to bring the asset to its intended use. Subsequently, PPE is measured at historical cost less accumulated depreciation and impairment losses. This is because the primary objective of measuring PPE is to reflect the asset's consumption of economic benefits over time, rather than its market value.

Measuring PPE at net market value could lead to volatility in the financial statements, as market values can fluctuate significantly over time. This could distort the true operating performance and financial position of the fund. Additionally, PPE is not held for the purpose of generating a return through its appreciation in market value, but rather for its use in the fund's operations.

Therefore, it is appropriate for PPE held by the fund for its intended use in the operation of the fund and not for sale or investments to be measured at historical cost less accumulated depreciation and impairment losses, in accordance with accounting standards. This approach provides a more reliable and stable representation of the fund's financial position and performance.

Discuss This Statement,'Property,Plant and Equipment Held by the Fund for Its