129 Chapter 22 Paper F7 Theoretical matters September/December 2016 Current cost accounting (cca) cca is the system of accounting applied to the concept of operating capital maintenance the value of assets consumed or sold, and those in the statement of financial position are stated at their value to the entity value to the entity is known as deprival value deprival value is lower of cost (rc) net realisable value (nrv) present value (pv) higher of depreciation is charged on the asset based on gross replacement cost where replacement cost is the deprival value where nrv or pv is the deprival value, the charge against cca profits will be the loss of value of the asset goods sold are charged at their replacement cost. For example, an item of inventory which costs $25 is sold for $32 by which time its replacement cost has risen to $28 cca trading account would show: revenue 32 replacement cost of goods sold (28) current cost profit 4
Chapter 22 Paper F7 Theoretical matters September/December 2016 Current cost accounting (cca) cca is the system of accounting applied to the concept of operating capital maintenance the value of assets consumed or sold, and those in the statement of financial position are stated at their value to the entity value to the entity is known as deprival value deprival value is 129 lower of cost (rc) higher of net realisable value (nrv) present value (pv) depreciation is charged on the asset based on gross replacement cost where replacement cost is the deprival value where nrv or pv is the deprival value, the charge against cca profits will be the loss of value of the asset goods sold are charged at their replacement cost. For example, an item of inventory which costs $25 is sold for $32 by which time its replacement cost has risen to $28 cca trading account would show: revenue 32 replacement cost of goods sold (28) current cost profit 4