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Introducton As you requested I have researched the many possible methods used to account for long-term assets and prepared a statement outlining my recommendations The conclusions outlined herein are derived primarily from my interpretation of both the Conceptual Framework and its intentions Based on my findings I believe the liability should be recognized when it is acquired If new information arises allowing a better estimate to be made the adjustment should be made and noted in the financial statements Also when attempting to measure the value of the liability for use in financial statements the Present Value of the item should be used The related expense must be recorded initially as a capitalized asset and then expensed in the form of depreciation over its useful life The following paragraphs will provide support for my conclusions as per the Conceptual Framework while also considering the opinions of representatives throughout the accounting field When to recognize the related liability One of the central objectives of financial reporting is to provide information that is useful to both present and potential creditors investors and other users for decision-making purposes To this end in order to recognize a liability a firm must first determine that the item in question represents a present obligation requiring probable future sacrifice of economic benefit Also this must come as a result of past transactions In order enhance the usefulness of accounting information it must be as relevant and reliable as possible I believe that recognizing a liability at the point of acquisition and depreciating the related cost over the useful life is the method most consistent with the intentions of the Conceptual Framework By recognizing the liability in this manner investors and creditors are aware of its existence as soon as it starts to impact the firm Since the information distributed in this way is relatively current it can help users to predict future events such as cash flows or lack
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