How does the accountant use estimates and judgment in the valuation of property, plant, and equipment?
In the broad field of finance and accounting, account estimates are the approximate monetary amount devoid of an asset's present value. Accountants can judge property, plant, and equipment by factoring various financial factors such as depreciation and appreciation, among others, based on the nature of the asset. The netbook value of the property, plant, and equipment after factoring in depreciation or appreciation is the most used method by accountants making judgments and estimates about the value of a property (Kieso et al., 2019). The estimates arrived at may not necessarily be accurate if the based on failure to include the prevailing financial factors of consideration such as accrued expenses, realizable value, impairment. The nature of the asset has a great significance on the accounting estimates of a product. For instance, the accounting estimates of land and that of plant and machinery used very different mechanisms in their present value estimations.
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Is it ethical for an accountant to use estimates and varying methodology to achieve desired corporate results?
It is not ethical for an accountant to use estimates and varying methodology to achieve desired corporate results since it may not give an accurate representation of the reality hence an inaccurate result. However, to make corporate projections in the realization of the organizational goals and objectives, it is professionally ethical for accountants to use estimates to achieve the desired corporate results. In using estimates for corporate projections and future operational management planning, there should be room for adjustments based on the prevailing business environment (Kieso et al., 2019). Having room for adjustments illustrates the organization's flexibility from a financial perspective to navigate through challenging or prosperous business times. However, it is unethical for accountants to use estimates and various methodologies to achieve the desired result in the valuation of the present value of a business asset. It would be inaccurate and overstretching the accountant's mandate. In such a scenario, the services of a business property valuation provider would be appropriate.
Reference
Kieso, D. E., Weygandt, J. J., Warfield, T. D., Wiecek, I. M., & McConomy, B. J. (2019). Intermediate Accounting, Volume 2 . John Wiley & Sons. http://www.academia.edu/download/35905258/ch17.pdf
