Amy BERHAD, a public listed company, purchased used plant by issuing 1,000 shares of its common stock to the seller. On the date of the purchase, its price was quoted at RM$50 per share, making the value of the stock issued to purchase the machine equal to RM50,000 (1,000 shares x RM50). WENY had the plant appraised. The appraiser estimates its value at RM60,000.

According to Statement of Financial Accounting Concepts (SFAC) No. 8 and IASBs conceptual framework (Section 2), amounts reported to publish financial statements should satisfy the qualitative characteristics of relevance and reliability (faithful representation). You are an investor trying to decide whether to invest in WENYs common stock.

REQUIRED:

1. Distinguish between relevance and reliability and evaluate how each valuation is thus more relevant or more reliable than the other. Include in your evaluation the long-held belief that a trade-off relationship exists between these qualities. (17 Marks)
2. Evaluate which value RM50,000 or RM60,000 is more relevant to your decision to invest? Which is more reliable? Explain your answers to both questions. (8 Marks)