AOS - New Basis vs Old Basis

[h8xams]

Hi,

I am a little confused about the reasoning mentioned in the notes for using the new basis method in an AOS (i.e. the first item in the AOS is the effect of the basis change) rather than the old basis method (i.e. the basis change is the last item). In particular, it mentions that the new basis method is a better check on the result of the current valuation.

Why is this? Surely the new basis vs old basis is purely a presentational change and so each should be an equal check on the valuation results. If one method can reconcile the results between the two valuations surely the other will do so too.

Any help would be appreciated.

 

[Gresham Arnold]

I guess that you could argue that:

- if you rework your latest valuation on last time's basis and do the AoS on this, then your AoS is not providing any check on the "basis change". So, you could have made a major mistake in your "new basis" calculations in the latest valuation (eg entered an important assumption incorrectly) and the AoS would not pick this up (although hopefully other checks would)

- if, on the other hand, you rework last time's valuation onto the new basis and do the AoS on this basis, then your AoS should pick up any such error.