Final answer:
The notes in an annual report indicate whether a company following IFRS records its assets at historical cost or fair value. These valuations affect the asset figures on the balance sheet, thereby influencing the company's net worth and financial health as depicted in a T-account.
Step-by-step explanation:
When reviewing a company's annual report to determine how a company that follows IFRS has chosen to record its tangible and intangible assets, one should look for whether these assets have been recorded at historical cost or their fair value. Historical cost refers to the original monetary value of an asset, while fair value is a current market-based valuation. The notes following the financial statements are crucial for understanding the valuation methods used for assets on the balance sheet.
An asset is an item of value that a firm or an individual owns, which is listed on the balance sheet. The balance sheet serves as an accounting tool that lists a company's assets and liabilities, detailing the financial health of the business. The value of assets can greatly impact a company's net worth, which is calculated as total assets minus total liabilities. This is reflected in a T-account where assets and liabilities must balance out, indicating the financial stability of a business.