Abstract
The purpose of the study is to identify the scope of application of historical cost and fair value accounting. Historical cost is the purchase price of an asset acquired by a company. Fair value accounting is based on the current market situation as of the current date. Each type of valuation can be conditionally defined as subjective. However, either historical cost or fair value can be used to form the reporting indicators necessary for key users and stakeholders. The study is based on the analysis of fundamental accounting assumptions (static and dynamic balance-sheet), research papers on accounting, and the legislation of the Russian Federation governing the business activities of legal entities. The study resulted in a logical basis for the use of both fair value and historical cost in producing reporting data, as well as in finding solutions to the problem of their combined use in a single statement. Fair value is necessary to characterize the returns on investments and financial position of a company (static balance-sheet), and historical cost is necessary to calculate returns from ongoing business operations (dynamic balance-sheet).
Highlights
The ongoing debate on how to evaluate the indicators of financial reports has led to the question whether historical cost or fair value should be used? For many years in Russia, the historical value was considered as the only possible indicator
We have to dwell on the main approaches to evaluating the historical cost and fair value, which are the main characteristics of dynamic and static balance-sheet
The following conclusions can be drawn from the results of the study: 1. Both historical cost and fair value are very important for the formation of financial statements for external users
Summary
For many years in Russia, the historical value was considered as the only possible indicator. The ongoing debate on how to evaluate the indicators of financial (accounting) reports has led to the question whether historical cost or fair value should be used? It was used both for reporting and comparison of actual indicators with the planned ones in the analysis of the effectiveness of economic activity. The key users of financial statements are investors: owners and creditors. Wong “Corporate ownership structure and the informativeness of accounting earnings in East Asia” (2002)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
