Commonwealth Consolidated Acts Commonwealth Consolidated ActsAn entity that uses the opening and closing balances method for a period must apply the following method statement to calculate the average value of a matter for that period.
Method statement
Step 1. Work out the value of the particular matter as at the first day of that period .
Step 2. Work out the value of the particular matter as at the last day of that period.
Step 3. Add the results of steps 1 and 2.
Step 4. Divide the result of step 3 by 2. The result of this step is the average value.
Example: ALWZ Corporation, a company that is an Australian entity, held assets valued at $95 million on the first day of an income year. It held assets valued at $105 million at the end of that year. Adding those amounts and dividing the result by 2 gives the average value of its assets for that year, which is $100 million.