Four methods for valuing assets is based on historical or acquisition cost, price-level adjusted historical cost, fair-value accounting, and net realizable value. Historical cost is described as the value used as a source for tax returns and financial statements, (Finkler, Ward, & Calabrese, 2013). Price-level adjusted historical cost is used to alter the assets historical cost, from the overall amount of increase. Fair-value accounting represents recording stocks and bonds at current value to be sold for profit. It’s a common valuation method and it has a higher objective intention for data. Lastly, net realizable value is based on quantity received if sold, and if any net costs pertaining …show more content…
For example, the fair-value accounting is valued by financial assets from looking at published stock market trades. Health care organizations can purchase stock in the company of their choosing and record the price paid for it. It depends if the stock price increased or decreased and it would have to be recorded, if significantly dropped the record of current market value is needed on the balance sheet. The main weakness for fair-value valuation method is when marking to market, not as financial assets has the objective evidence for valuation. Also, depending how it affects health care organizations of the hierarchy of fair values decreases objectivity from level 1 to level 3. Finally, net realizable value is to measure assets as what to get for them if to sell them. This method is helpful to give current value assets as most organizations would want. A big downfall of net realizable value is it does not seek potential profit and to see what to obtain from it. Furthermore, the issue of no way to determine the accurate value of each of the health care organizations assets unless sold. It’s a concern when a net realizable valuation is on the basis to someone’s subjective assessment of what it can be purchased …show more content…
Cash and accrual accounting are present in health care and cash basis is what people use daily for personal needs. Not-for profit versus for-profit organizations have a particular set of standards for their donor contributions which is less extensive than for-profit organizations. The restricted classifications are bounded by donor requests and how the funds are ultimately used. Then, the detailed overview of the Stanford Consolidated financial statements entailing cash flows, operating, and balance is diverse in financial gains and losses compared to 2013 and 2014. GAAP valuation methodology is helpful in many ways for accountants, health care managers, for valuing assets, insurance coverage, equipment, and physician practices. However, there are limitations and diligent work of determining the appropriate value method for the issue. Without all these accounting concepts, evaluating financial statements, and deciding the right valuation method, health care organizations would be profitable as they are