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Article: Commentary: The need for a touchstone: Historical cost and transaction basis.
- Article from:
- Accounting Today
- Article date:
- April 14, 2008
- Author:
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Until 1991, the accounting profession was largely guided by historical cost, transaction-based accounting.
Granted, fair market value and historical cost at the point of the transaction were deemed equivalent, provided that arms-length transactions were involved. However, those making decisions investors, auditors and regulators grasped that unless someone gave and accepted consideration for something, its underlying value was arguable.
When all of those familiar with the traditional accounting framework that served economic spheres well through centuries were asked about alternatives, they clamored that fair market value information would be useful in ...