Commentary

Financial statements: Uses and limitations of valuation

Valuation plays a crucial function in the capital markets. Investors want to know the value of the investments, assets and liabilities under their stewardship. In the course of valuation, companies are dependent on the availability of value-relevant information such as financial statements.

The different assets and liabilities in a balance sheet are valued using different measurement methods, including historical cost, net realisable value, carrying amount, fair value, transaction price, amortised cost with impairment, cost less accumulated depreciation and accumulated impairment losses, and present value of future payments.

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A version of this article appeared in the print edition of The Straits Times on October 14, 2019, with the headline 'Financial statements: Uses and limitations of valuation'. Print Edition | Subscribe