tailieunhanh - Lecture Intermediate accounting: IFRS edition - Chapter 6: Time value of money concepts

Time value of money concepts, specifically future value and present value, are essential in a variety of accounting situations. These concepts and the related computational procedures are the subjects of this chapter. Present values and future values of single amounts and present values and future values of annuities (series of equal periodic payments) are described separately but shown to be interrelated. | TIME VALUE OF MONEY CONCEPTS Chapter 6 © 2013 The McGraw-Hill Companies, Inc. Chapter 6: Time Value of Money Concepts Simple Interest Interest amount = P × i × n Assume you invest $1,000 at 6% simple interest for 3 years. You would earn $180 interest. ($1,000 × .06 × 3 = $180) (or $60 each year for 3 years) The time value of money means that money can be invested today to earn interest and grow to a larger dollar amount in the future. Time value of money concepts are useful in valuing several assets and liabilities. Interest is the amount of money paid or received in excess of the amount borrowed or lent. Simple interest is computed by multiplying an initial investment times both the applicable interest rate and the period of time for which the money is used. Assume you invest $1,000 at 6% simple interest for 3 years. You would earn $180 interest. Compound Interest Assume we deposit $1,000 in a bank that earns 6% interest compounded annually. What is the balance in our account at the end of three years? Part I Compound interest includes interest not only on the initial investment but also on the accumulated interest in previous periods. Assume we deposit $1,000 in a bank that earns 6% interest compounded annually. What is the balance in our account at the end of three years? Part II Each year we earn interest on the initial investment amount plus any previously earned interest. As a result, at the end of the three years, we have a total of $1,. Future Value of a Single Amount The future value of a single amount is the amount of money that a dollar will grow to at some point in the future. Assume we deposit $1,000 for three years that earns 6% interest compounded annually. $1, × = $1, and $1, × = $1, and $1, × = $1, The future value of a single amount is the amount of money that a dollar will grow to at some point in the future. Recall our previous example where we assume we deposit $1,000 . | TIME VALUE OF MONEY CONCEPTS Chapter 6 © 2013 The McGraw-Hill Companies, Inc. Chapter 6: Time Value of Money Concepts Simple Interest Interest amount = P × i × n Assume you invest $1,000 at 6% simple interest for 3 years. You would earn $180 interest. ($1,000 × .06 × 3 = $180) (or $60 each year for 3 years) The time value of money means that money can be invested today to earn interest and grow to a larger dollar amount in the future. Time value of money concepts are useful in valuing several assets and liabilities. Interest is the amount of money paid or received in excess of the amount borrowed or lent. Simple interest is computed by multiplying an initial investment times both the applicable interest rate and the period of time for which the money is used. Assume you invest $1,000 at 6% simple interest for 3 years. You would earn $180 interest. Compound Interest Assume we deposit $1,000 in a bank that earns 6% interest compounded annually. What is the balance in our .

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• Intermediate accounting
• Lecture Intermediate accounting
• Financial Accounting
• Time value of money
• Compound interest
• Future value
• Accounting process
• Accounting equation
• Accounting processing cycle
• Stock issuance
• Estimating reserves
• Liquidating dividends
• Accounting changes
• Error corrections
• Accounting choices
• Theoretical structure
• Accrual accounting
• Financial accounting environment
• Accounting for leases
• Leasing environment
• Accounting by lessee
• Special accounting problems
• Cash versus accrual accounting
• International standard setting
• Accounting standards
• Accounting assists
• The challenges facing accounting
• Income taxes
• Accounting for income taxes
• Deferred tax liabilities
• Error analysis
• Accounting policy
• Accounting estimate
• Accounting policies
• Financial reporting
• Accounting information system
• Measurement issues
• Characteristics of accounting
• Capital allocation process