Question

Knowing that accounting and reporting laws differ widely around the world thereby posing risks for the international business, briefly explain for each how physical asset valuation (PAV) and research and

development (R&D) costs are likely to pose risks?

Answer 1

Answer

Around the world, different accounting regulation is applicable like the US uses US GAAP whereas majority of other countries use IFRS based accounting standards.

While doing Physical Asset Valuation, following factors differ around the world :

• Use of Book Values
• Method of Depreciation
• Tax Base valuation
• Use of Present Value
• Rate of calculating Present Value

While doing R&D Costs, following factors differ around the world :

• The cut-off date for capitalisation
• Method of estimation of future economic value
• Definition of Development differ
• Method of amortisation of capitalised value of asset in development phase