Accounting and Managerial Finance: Hilton Case Study

Hilton hotel is a business leader in hospitality firms globally. Likewise, the Hilton Hotel is listed on the New York Stock Exchange as NYSE: HLT. The Hilton hotel is fundamentally concerned with managing and expanding the hospitality industry globally.

(a) Give a brief explanation of the concept of fair value and discuss how IFRS 13 Fair Value Measurement sets out guidelines for measuring fair value in practice.

Fair value is a methodology employed in accounting to report monetary data. As such, firms are required or permitted not to quantify and give an account on ongoing basis specific resources and in addition liabilities in view of estimations of the expenses they can get in the event that they decide to sell properties or the expenses incurred to transfer assets (Biondi, 2011).

Asset or liability

Fair value measurement is specific to a given asset or obligation. Besides, it considers the precise components of assets or liabilities that market players use to assess the real estimation of a specific resource or risk at the estimation date.

Exit price v. Entry Price

At the point when a given asset is obtained, or a liability for that matter, then the exchange expense is the sum; paid to, however the asset is received to get the liability.

Market model

This is one of the essential rules utilized by IFRS 13 as a part of measuring fair value. As per IFRS 13, fair value is essentially a business-oriented estimation as opposed to an element particular estimation.

Market players

Fair value determination is created from the point of view of business sector players. Case in point, when determining the fair value of customer related elusive assets are bought in a business mix expressly considered in IFRS

Price

Fair value is an expense obtained to sell assets or paid to move liabilities in a structured way in the most gainful/essential market, at estimation period taking into account the current market circumstance whether that cost is specifically recognizable or anticipated with another valuation approach (Whittington, 2008).

b) Identify the principal types of non-current (fixed) asset owned by your chosen company (depending on the company chosen, these may be intangibles or tangibles, or both – if there are many different types of non-current asset, restrict your report to the three most significant types of asset).

Hilton hotel has non-current assets such as; Long Term Investments; Property Plant and Equipment; Goodwill; Intangible Assets; Accumulated Amortization; Other Assets; and Deferred Long Term Asset Charges

(c) Discuss the problems that your chosen company is likely to have to deal with in order to measure the fair value of the types of asset you have identified.

Pricing variation
Hilton hotel faces the issue of price variation, because the fair value is linked with determining the value of encounter the issue of value variety since reasonable worth is connected with the imprecision of estimation procedure of non-current resources that will show ambiguities in the financial statements (Bushman and Landsman, 2010).

False Information

Now and again, the watched estimation of assets does not show the assets basic value

Lack of a market price

Hilton hotel is highly likely to be confronted with the absence of market value; this is due to the unavailability of specific resource is not accessible in the business sector, fair value approximation is usually hard to realize.

Inadequate reliability

It is arguable that financial reporting as presented by fair value is imperative and solid for a given time span.
Volatility

Unpredictability will unfavorably influence Hilton, particularly if the fair value of its non-current resource is reliant on market circumstances; this suggests its value changes in light of the business sector (Bushman and Landsman, 2010).

d) Comment on whether the IASB’s approach to fair value measurement is practical for companies with non-current assets that are not actively traded on broad and deep markets.

The IASB’s methodology to measure fair value for organizations with fixed assets that are not effectively traded on bigger markets.

Bibliography
Alexander, D., Britton, A. and Jorissen, A. 2011. International Financial Reporting and Analysis, Andover: Cengage Learning (5th edition). ISBN:978-1-4080-3228-2.
Armstrong, C., Barth, M., Jagolinzer, A., & Riedl, E. (2009). Market Reaction to the Adoption of IFRS in Europe. Accounting Review, Forthcoming.
Ball, R. (006. International Financial Reporting Standards (IFRS): Pros and cons for investors. Accounting and business research, 36(sup1), 5-27.
Barnes, R. 2002. Earnings volatility and market valuation: An empirical investigation. LBS Accounting Subject Area Working Paper No. ACCT019.