Conceptual Framework  Lec 01 Part 5 - video Dailymotion

HM RANA UMAR FAROOQ  The best teacher of CMA USA

Watch Conceptual Framework  Lec 01 Part 5 - HM RANA UMAR FAROOQ  The best teacher of CMA USA on Dailymotion

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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.

Conceptual Framework Lec 01 Part 5

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