Conceptual Framework Lec 01 Part 5
Transcript
00:00I am going to tell you a story about a man who bought a building worth 10 lakhs 60 years
00:15ago.
00:16What will you call it?
00:19Historical past.
00:20What will you call it?
00:22History.
00:23When was it built?
00:25What date was it built on?
00:2914th August 1947.
00:31Now this is history.
00:33It can never change.
00:35What date were you born?
00:388th April 1987.
00:40Now this date can never change.
00:43History never changes.
00:45What is the historical cost?
00:48You pay the cost for the first time.
00:51What do we call it?
00:53Historical cost.
00:54What do we call it?
00:56Historical cost.
00:57So this is what we have learnt.
01:00Next is current cost.
01:02You have learnt the realisable value in your inventory.
01:06Realisable value is very much relevant to selling.
01:10You can say that realisable value is the exact price.
01:15Which one is the exact price?
01:20When you are saving someone's life, what do you call it?
01:23Exit.
01:28It is also very important to take a timely exit.
01:31Yes.
01:32Which one, son?
01:35No, no.
01:37I have gone directly to the realisable value instead of the historical cost.
01:44Is the historical cost clear?
01:46Yes.
01:47Okay.
01:53Okay.
01:54I will tell you.
01:55When someone comes in the future, write the current cost in it.
01:58First, you listen to me.
02:01Do not trace it in the book.
02:02First, listen to me.
02:03I will explain to you.
02:04All the things will be traced.
02:05I will write it here.
02:06What was the first standard basis?
02:08Historical cost.
02:13Historical cost.
02:15What do you call the cost?
02:17Cost.
02:18What do you call the first cost you pay?
02:21Historical cost.
02:22Has it ever changed?
02:23No.
02:24No.
02:25Okay.
02:26If we look at the impairment, the historical cost is used for the written down value.
02:32In impairment, we used two more values.
02:35Which one for the recoverable amount?
02:37One was the present value.
02:40One was the present value.
02:42And one was?
02:43Fair value.
02:44One was the fair value.
02:46So, one standard basis is also fair value.
02:50IAS 16.
02:52Revaluation model.
02:54What is the standard basis for us?
02:56Fair value.
02:58What is the meaning of standard basis?
03:01When we write things in the financial statement,
03:06we are using a standard basis on the basis of these standards.
03:10If an asset is on the cost model, then it will always be on historical cost.
03:15If an asset is on what?
03:17Cost model.
03:18If an asset is on the cost model, then it will always be on?
03:20Historical cost.
03:21It has nothing to do with its fair value.
03:23But if an asset is on the revaluation model,
03:28Which revaluation model?
03:30IAS 16.
03:33What is the standard basis for investment property?
03:36IAS 40.
03:37So, in the fair value model,
03:42In the fair value model, what do we measure the asset on?
03:45Fair value.
03:47And what is fair value?
03:55Reasonable price.
03:58Fair value means,
04:01It is a knowledgeable buyer.
04:03It is a knowledgeable seller.
04:05In an orderly transaction,
04:09At which price, it can be with coercion.
04:11It can be with undue influence.
04:13It can be with undue influence.
04:15It can be with coercion.
04:17It can be with force.
04:18There is no relation.
04:20In an orderly transaction.
04:22What happens?
04:24In an orderly transaction.
04:25Without any influence.
04:26Without any pressure.
04:28In an orderly transaction,
04:30At which price, it can be with coercion.
04:32It is a knowledgeable buyer.
04:34It is a knowledgeable seller.
04:36In an orderly transaction.
04:39At which price, it can be with coercion.
04:41For buying and selling.
04:43What is it called?
04:44Fair value.
04:46What is your name, bro?
04:56You must have done a revolution in IAS 16.
05:00In that, a word was written.
05:02Net Replacement Value Method.
05:04Have you read it?
05:06Have you read it in any question?
05:08You have asked the question.
05:10Have you read it?
05:11Net Replacement Value Method.
05:12What does it mean?
05:15I am not asking you.
05:21The day you start reading ICAP questions like this.
05:24What does this word mean?
05:26You will pass.
05:27I did not let anyone go ahead.
05:29Any question.
05:31Tax, Law, FML.
05:32If there is anything new,
05:34If there is a new expression, ask.
05:35Sir, what does it mean?
05:36You have to find it yourself.
05:38You have asked so many questions.
05:40It is written.
05:41You have to evaluate.
05:42Net Replacement Value Method.
05:44Do you know what it is?
05:48Have you read it?
05:49What is Net Replacement Value Method?
05:51Was it written in the question or not?
05:53Now tell me what it is?
05:55Which method?
05:56Which method?
05:58What does Net Replacement Value Method mean?
06:00Net Replacement Value Method means
06:02If I go to replace such an asset,
06:05How much will I get in the market?
06:08Market price of the similar asset.
06:11It is called Net Replacement Value Method.
06:13When it tells you,
06:15I am using the evaluation model.
06:17What values are there in the evaluation model?
06:19Fair value.
06:20What fair value will I take for this asset?
06:22If I go to sell such an asset in the market,
06:25If I go to replace it,
06:26How much will I get?
06:28It is called Net Replacement Value Method.
06:30It is often mentioned in the questions.
06:32The general antidote to the evaluation of IAS 16.
06:35Okay.
06:36What is the jail value?
06:38Jail value is knowledgeable buyer.
06:40Knowledgeable seller,
06:42According to the transaction.
06:44Everyone knows,
06:46How much is the rate of IAS?
06:49You can check it from Google.
06:51You can check it on their website.
06:53If it is written 132,000,
06:55How can the shopkeeper tell?
06:57131,000,
06:58131,500,
06:59132,000,
07:00132,500.
07:01It is not that
07:03the shopkeeper will ask you for 1.5 lakh.
07:05If you are a knowledgeable buyer,
07:07You will not give him 1.5 lakh.
07:09You will say,
07:10There should be something around 132,000.
07:12Is it right?
07:14If you are a knowledgeable seller,
07:16He will not give you his 132,000 in 1 lakh.
07:18He will not even give it cheaply.
07:19He knows his worth.
07:20If he does not take it,
07:21Someone else will take it.
07:22So,
07:23There is an agreed price,
07:25Jail value.
07:26But,
07:27It is important to be smart.
07:28Whenever something is a sale,
07:30Search in Google.
07:31Go to their original website.
07:32See where it is.
07:33The story will end.
07:35That price,
07:36Knowledgeable Buyer
07:37and Knowledgeable Seller.
07:39The price at which
07:40an orderly transaction is made,
07:42What is it called?
07:43Fair value.
07:44And we know,
07:45That some assets,
07:46We have studied IS16.
07:48What is it measured on?
07:50In the revaluation model,
07:52Fair value is used.
07:54Historical cost is not used.
07:56Is it right?
07:57And,
07:58We have studied IS40.
08:00What basis is used in that?
08:02What is the next one?
08:03Fair value.
08:05So,
08:06You have seen,
08:07What is the basis in fair value?
08:08Is it right?
08:09Third,
08:10You have studied
08:11IS36,
08:12Impairment.
08:13In impairment,
08:14Present value is also used.
08:16When we,
08:17Calculate value in use,
08:20If the value in use is higher,
08:23Then,
08:24This will be the recoverable amount.
08:26And,
08:27What will you do on this?
08:28Measure the asset.
08:30Remember,
08:31Recoverable amount in IS36?
08:34Recoverable amount is higher of,
08:37Value in use,
08:39And,
08:40Fair value less cost to sell.
08:41If,
08:42Fair value less cost to sell is less,
08:44Then,
08:45What value will we take?
08:46Value in use.
08:47And,
08:48We will make value in use,
08:49Recoverable amount.
08:50And,
08:51On what will we measure the asset?
08:52On value in use.
08:54Is it right?
08:55And,
08:56What is value in use?
08:57Future cash flows,
08:59What is it?
09:00Present value.
09:04This means,
09:05Some asset,
09:06Which is at historical cost,
09:09If it is at fair value,
09:10Like IS16,
09:11Fair value model.
09:12And,
09:13If value in use is higher in IS36,
09:15Then,
09:16That asset will not be at fair value less cost to sell.
09:18But,
09:19Value in use.
09:20And,
09:21Future cash flows,
09:23Present value.
09:24Some assets,
09:25Can also be at present value.
09:29Is it right?
09:30Another concept we have is,
09:32Realizable value.
09:36Realizable value.
09:40For this,
09:41We have IS2,
09:42Best example.
09:45What is realizable value?
09:50Yes, tell me.
09:51What is realizable value?
09:53I read in IS2,
09:55Expected selling price,
09:57Less expected cost to sell.
10:00How much money will we get by selling this?
10:04Realizable value is very much relevant to,
10:07Exit price,
10:08Selling.
10:09When you sell something,
10:11The relevant thing for us is,
10:13Realizable value.
10:15Like you are saying here,
10:17If you sell an asset,
10:19In IS36,
10:21Two values are taken.
10:23Which are they?
10:25When our camera man uploads,
10:27Two things are taken.
10:28Which are they?
10:29Value in use and,
10:30Fair value less cost to sell.
10:32Not only fair value.
10:35Fair value less cost to sell,
10:36Not fair value.
10:38You can call it realizable value.
10:41Because,
10:42Fair value is what was being sold in the market.
10:44But, you have to reduce the expense.
10:45Net realizable value means,
10:47By selling this asset,
10:48By selling this inventory,
10:49What will be the net inflows?
10:51What will be the net cash?
10:53What do we call it?
10:56What do we call it?
10:57Realizable value.
10:59Is it right, friends?
11:00Okay.
11:02Now, let's see what is written here.
11:04Historical cost is written.
11:07Fair value is written.
11:08Two things can happen in current values.
11:10Current value can be found in the market.
11:12What is fair value?
11:13And what is the second one?
11:14Value in use.
11:15This will also be discussed.
11:18Current cost is written here.
11:19What is current cost?
11:24Current cost or replacement cost.
11:26It's the same thing.
11:29Current cost or replacement cost.
11:32If we want to replace such an asset,
11:35How much will we get?
11:39Current cost is very much relevant to purchase.
11:42Realizable value is very much relevant to sell.
11:45What is current cost?
11:47What is the opposite of exit?
11:49What is the opposite of exit?
11:51In.
11:52You can say that
11:53If you want to see in price,
11:55Current cost will be there.
11:56And if you want to see exit price,
11:58Realizable value will be there.
12:01Are you getting it?
12:15This is an example given by Adeen Limited.
12:29This is an example given by Adeen Limited.
12:34After that, its answer is also given.
12:36See how much you understand.
12:45Thank you for watching.