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The cons and pros of fair value versus historical cost accounting and deprival value - Essay Example
Finance & Accounting
Pages 6 (1506 words)
THE PROS AND CONS OF FAIR VALUE VERSUS HISTORICAL COST ACCOUNTING AND DEPRIVAL VALUE Institution name Introduction Organizations are expected to keep track of their state of affairs and performance over specified time duration using numerical financial reports…
Financial reporting requires extremely accurate form of measurement to deliver information to lenders and shareholders who are obliged to know how wisely their money is being spent (Barth 2007). Van Zijl & Whittington (2006) reveal that the current form of measurement is increasingly emphasizing on the use of current value to replace historical costs. The principle reason behind the establishment of accounting standards was to ensure that financial information produced by organizations are accurate, reliable, complete, timely and relevant. In addition, accounting standards would ensure that organizations not only demonstrate accountability but also maintain it while meeting statutory reporting requirements such that the stakeholders are accounted for organizational financial performance to support decision making (Cooper 2007). Currently, the measurement basis for measuring amounts in financial statements includes among others historical cost, amortized historical cost, fair value and value in use. This paper evaluates the pros and cons of fair value versus historical cost accounting and deprival value. 1.0. ...
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