"The principle of historical cost is still used in accounting when there is a large measure of agreement that it is inappropriate." Discuss.

Synopsis. diachronic Cost method of accounting is a traditional rating system as it reflects only on the past follow of the plus, all the same in the contemporary business purlieu companies must bear flexible and transp atomic number 18nt. This article of belief has lead to the creation of several separate valuation methods, repayable to word constraints I have pore primarily on dependable Value Accounting as an alternative to historic Cost Accounting. Although Fair value story is a theoretically superior valuation methodology, there are several fearsome problems in its current application, due to sluttish regulations and ineffective methods of find out current values of non-current assets. These problems deep down Fair Value Accounting have ensured that most companies conservatively retain using historic Cost Accounting. What are Historical be? Historical woo is a generally accepted accounting belief requiring all goods or assets used in production to be valued by the expenditures actually incurred to acquire those goods or assets, unless far brook in the past those expenditures took place (System of matter Accounts, 1993). Valuing assets upon their original woo ensures valuations are objective, reliable and may be verified through and through invoices and documentation. Furthermore, accumulative depreciation ensures that the damage of the asset is spread end-to-end its productive life sentence. This method smooths out unsound fluctuations within Financial Statements to reflect comparable changes in friendship performance.

The American Accounting Associatio n (AAA 1936, p188) supported this view; ...a! ccounting is therefrom non essentially a process of valuation, barely the apportioning of historical costs and revenues to current and succeeding fiscal catchs. Criticisms of Historical cost Accounting Historical cost method, over a period of time has been subject to many criticisms, especially as it tells the user the learnedness cost of an asset and its deprecation in the quest years, but ignores the possibility that the current market value of that asset may be higher or... If you want to get a dear essay, order it on our website: OrderCustomPaper.com

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