# Residual Income Theory Case Study

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– Academic and sector literature related to appropriate theory Residual income theory can value the company or stocks. Theory can show the asset after using the expense, cost of capital, monthly using expenses of asset. Compute how much income earning after the investment. "Residual income measures the excess of the income earned over the desired income." Residual income formula as below, Residual Income=Operation income - Desire income Operation income is a profit after the cost of operation and expenses in the financial statement, the shareholders can found it in the statement of comprehensive income. The statement were show all operation item, as such how many cost of goods sold, how many expense had used in the past year. Desire…show more content…
The residual income theory including the shareholders and potential shareholders expect the stock can return the earning to them. They expect the market value of stock can higher than their investment in the present value. "Net asset value (NAV) is value per share of a mutual fund or an exchange-traded fund (ETF) on a specific date or time. " Compute Net asset value is the company asset less liability than dividend by number of outstanding shares, formula as below, Net asset value= (Asset-Liability) No. Outstanding…show more content…
According to IAS 16, the financial statement using their carrying amount for the year, “The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the recognition of assets, the determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them." The machines are the important equipment of companies for the mining industry, so valuing the equipment; the value usually used net asset value. But according to IFRS 6, the asset of mineral industry adopts the value after impairment loss under the International Financial Reporting Standard. According of these accounting standards, there were different calculation methods to the value of asset in the financial statement. Under the IAS standard, the asset recognize there amount, determination of the carrying amount, deprecation and impairment loss. The asset value were change of the time when the people incurred .The company statement of Financial position were show the item under these two accounting standard to calculate the revaluation of assets. According to IAS 40, investment in property, plant and Equipment, the cost of value is reflecting the fair value in the financial statement. “IAS 40 Investment Property applies to the accounting for