Capital

|
|
 
The Capital Expenditure DecisionISSUED BY THE
INTERNATIONAL FEDERATION OF ACCOUNTANTS ForewordThe Council of the Malaysian Institute of Accountants has approved this Foreword for publication.The status of Statements on International Management Accounting Practice is set out in the Council’s statement on Approved Management Accounting Statements.Notes and ExceptionsParagraph 25 if this practice statement refers to the two methods of market study. The first method as explained in paragraph 21 can be refered to as the ‘external method’ whilst the method described in paragraph 24 has been refered to as the ‘internal method’.Paragraph 46 on Evaluation Techniques lists various techniques that use the ‘discounted cash flow’ method but omitted the ‘discounted payback method’ that is described in paragraph 45(e). It has been confirmed that the discounted payback method should have been included in paragraph 46 as an additional method which uses discounted cash flows.The supply of factors of production has a limiting effect on the capacity utilisation of the capital projects. Such considerations are vital to the design of the capacity. This issue should be borne in mind even though it is not addressed in this practice statement. CONTENTS     | Paragraph |
INTRODUCTION | 1-4 |
SECTION 1 - QUANTITATIVE ESTIMATES | 5-44 |
1. | Fixed Investment Estimates | 8-11 |
2. | Working Capital Estimates | 12 |
3. | The Planning Horizon - Economic Life | 13-18 |
  | * | Physical Life |   |
  | * | Technological Life |   |
  | * | Product - Market Life |   |
4. | Market Estimates | 19-28 |
  | * | Market Study |   |
  | * | Competitive Factors |   |
  | * | Price Estimation |   |
  | * | The Organization's Position in the Market |   |
5. | Operating Cost Estimates | 29-38 |
  | * | Labor - Associated Payments, etc. |   |
  | * | Labor - Savings from Reducing Time Required of Individuals |   |
  | * | Efficiency Improvement |   |
  | * |...