Valuing the Cost of Long-Term Assets (Essay Sample)
US GAAP follows the Historical Cost Concept in valuing the cost of long-term assets. Explain this principle and how it compares to the standards used in the reporting of long-term assets under International Financial Reporting Standards (IFRS). If there is a convergence of standards, which method do you believe should be used and why?source..
Valuing The Cost of Long-term Assets
The City/ State:
14th June 2015.
The U.S essentially uses the historical cost concept in valuing the cost of long-term assets. This principle is based upon the time value of the asst. Here, there is a distinct maintenance of the initial book value of the asset at the time of its purchase. In other terms, the value of an asset is taken at the price at which it was purchased, without putting into consideration the depreciating or appreciating factor about the asset. It is only at the time when the asset is disposed, that the historical cost less the depreciation that the asset might have gone through (Scheid, 2010).
The Historical Cost Principle bases its argument on the fact that during valuation of an asset, it does not put into consideration the other factors that might have affected the disposal of the property. Among the most important and fundamental of assets; the market value. This principle, through the Generally Accepted Accounting Principles (GAAP), dictates that all the ass...
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