Current Value Accounting Technique

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on October 20, 2021

Under the current value accounting method, all assets and liabilities are shown in the balance sheet at their current values.

The difference in the value of net assets at the start and end of the year is known either as profit or loss. Significantly, determining current values is not a straightforward task.

Example

Horizon Ltd. Balance Sheet

Horizon Ltd. Balance Sheet
The general index was 100 in 2009 (i.e., the base year). It was 200 in 2018 and 250 in 2019. No dividend was paid in 2019.

Required: Prepare the following:

  1. Supplementary Income Statement at current value.
  2. Supplementary Comparative Balance Sheet at current values.

Solution

Conversion of Assets at Current Values (2019 Index)

Current value accounting technique example
Conversion of liabilities at current value 2019
Sundry Creditors: 250/200, 25,000, 30,000, 31,250, 30,000
Calculation of loss for holding current assets
Loss Calculation for Current Assets
Loss = Current values – Historical values of current assets
= 81,250 – 65,000 = $16,250
Calculation of gain from current liabilities
From Sundry Creditors (Current Value – Historical Values)
= 31,250 – 25,000 = $6,250
Net loss from holding current assets and current liabilities
= 16,250 – 6,250 = $10,000

Supplementary Income Statement at Current Values

Supplementary Income Statement at Current Values

Supplementary Comparative Balance Sheet at Current Values

Supplementary Comparative Balance Sheet at Current Values

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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