The external experts had experience and network (Glückler and Armbrüster, 2003), expertise (Morris and Empson, 1998), image (Power, 2003) and access to banks, analysts and market research institutes. These parties were, therefore, able to confirm the network of trust (Power, 1996) required to relieve the auditors of their objections. This controller elaborates on how difficult it was to assess the future over and above the budgeted expectations. Most controllers explained during the interviews that in their line of business, it was difficult to present even the three years of budgeting forecasts with relative certainty.

Mouck (2004), on the other hand, holds that epistemological objectivity can be created for individual users because the values can be seen as indicators for a shared understanding. However, to reach a shared understanding, Mouck argues that it is imperative to understand the rules of the game before judging the epistemological objectivity. This understanding leads back to the IASB’s 2010 depiction of faithful representation which includes the three elements of an agreed-upon procedure, a shared understanding of the application of the procedure and transparent communication of connected uncertainties.

1. In a booming real estate market, the fair market value of the land five years later might be $35,000.
2. The case presented here shows resemblance to the conclusions drawn by Huikku et al. (2017), particularly relating to the idea of the distribution of knowledge and the network surrounding the number.
3. These multiple measures assess the company’s ability to pay outstanding debts and cover liabilities and expenses without liquidating its fixed assets.
4. Whilst compelled to abide by the regulations, organisations need to bring the principles included in the standards into the organisation as accounting rules and systems.
5. Because part of the service will be provided in 2019 and the rest in 2020, we need to be careful to keep the recognition of revenue in its proper period.

In a similar manner, the dispersed nature of the impairment calculation, assisted by the different dialogues and negotiations across time and space, ensured that few actors understood the entire calculation. The auditors and the experts of the group accounting team were familiar with the procedures, but even these parties were not involved in all details of the customisation of the tool. Several people referred to their role in the process as “one part of a big wheel”, where the individual positions were clear in terms of working tasks, but unclear in relation to the overall purpose. Overall, it took external nods and convincing arguments to build a consensus about cash flow forecasts and discount rates. Given the three moments of becoming, the next section elaborates further on the question of how some actors and arguments became more persuasive than others in the negotiation of calculation inputs.

This study uses the concept of actor because it is most established in the accounting literature. Essentially, an actor or actant is an entity that acts or that is made to act by other entities. For example, assume the owner of a clothing boutique purchases hangers from a manufacturer on credit. The organizations may establish an ongoing purchase agreement, which includes purchase details (such as hanger prices and quantities), credit terms (2/10, n/60), an invoice date, and shipping charges (free on board [FOB] shipping) for each order. The basics of shipping charges and credit terms were addressed in Merchandising Transactions if you would like to refresh yourself on the mechanics. Also, to review accounts payable, you can also return to Merchandising Transactions for detailed explanations.

Which of these is most important for your financial advisor to have?

The case presented here shows resemblance to the conclusions drawn by Huikku et al. (2017), particularly relating to the idea of the distribution of knowledge and the network surrounding the number. On a more theoretical note, this study contributes by reflecting on the meaning of faithful representation and by elaborating three moments of relational becoming that create a form of epistemological objectivity. Whilst Huikku et al. (2017) suggest a rather unproblematic transition from standard requirements to calculation tools, this study highlights how and why the calculation tool becomes unchallenged, despite the uncertainties related to the standard requirements. On a more empirical note, this study contributes to existing knowledge by clarifying some of the previous findings. Firstly, the analysis refines our understanding of why external allies like consultants (valuation experts) are so helpful and important in the construction of the values.

Why is the current value accounting method used?

The second part then presents the study of associations as a way to understand and explain how we can create facts in financial reports that are inherently fragile but stable enough to travel and persuade. We know that preparers need to “make do” (Barker and Schulte, 2017) and that the formation of current values happens in a distributed calculation that creates a form of relative reliability (Huikku et al., 2017) and distributed cognition (Okamoto, 2014). The concept of relative reliability suggests that we can understand the reliability of current values in the context of impairment testing as an accumulation of traces which is tolerated by many different people inside and outside the organisation.

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However, with today’s technology, it is more common to see the interest calculation performed using a 365-day year. The portion of a note payable due in the current period is recognized as current, while the remaining outstanding balance is a noncurrent note payable. For example, Figure 12.4 shows that $18,000 of a $100,000 note payable is scheduled to be paid within the current period (typically within one year). The remaining $82,000 is considered a long-term liability and will be paid over its remaining life.

Property, plants, buildings, facilities, equipment, and other illiquid investments are all examples of non-current assets because they can take a significant amount of time to sell. Non-current assets are also valued at their purchase price because they are held current value accounting for longer times and depreciate. This section is important for investors because it shows the company’s short-term liquidity. According to Apple’s balance sheet, it had $135 million in the Current Assets account it could convert to cash within one year.

The external parties provided documentation that strengthened the bricolage of reports, system extracts and visualisations because they had access to even more systems and analysis tools producing even more inscriptions. The analysis takes these four characteristics as a point of departure to analyse the strategies used to enrol the relevant actors to the network of current value. Further, the analysis develops the framework by modifying and elaborating the characteristics in a financial accounting context.

Lantto (2014) and Weaver and Woods (2015) also find that their organisations had to implement new accounting systems with the introduction of IFRS, which then required further changes on organisational level like establishing new routines and expertise. Focussing on the introduction of IFRS, these studies present a valuable point of departure. Under historical Cost Accounting, assets and liabilities are shown at their original costs. Under current value accounting, assets and liabilities are shown at their current values.

It was also found that the central issue of the conventional debate revolves around the decision usefulness of accounting information whereas in Islamic accounting framework, the accountability framework is the main concern. Current value accounting is important because it considers the current market effects and provides a more realistic approach towards determining the monetary value. Most suitable for business that deals in purchasing and selling of assets and securities and whether those are very volatile to market changes. The main negatives regarding it are that, the value estimated are more subjected and hence, are prone to manipulation.

This is a real concern when reviewing the financial statements of older companies that may have assets and liabilities on their books from many years in the past, but is less of an issue for newer companies where this is not the case. Prepaid expenses—which represent advance payments made by a company for goods and services to be received in the future—are considered current assets. These transformations in professional identities played an important part in the creation of faithful values because the transformations brought distant actors closer together. The closer link observed also in previous studies (Hemmer and Labro, 2008; Jones and Luther, 2005; Weißenberger and Angelkort, 2011), enabled a distributed cognition (Okamoto, 2014) and enhanced the perceived quality of accounting information (Hemmer and Labro, 2008). Essentially, the transformation of professional identities gave strength to the network because it enabled the construction of more convincing inscriptions. Whilst not ambivalent, the transformation of professional identities towards more connectivity improved insight and enabled the necessary trust in numbers.

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