Which quality of an asset makes it more appropriate for the fair value principle rather than the historical cost principle?

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06-02-2020
Business

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Which quality of an asset makes it more appropriate for the fair value principle rather than the historical cost principle?

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almatheia almatheia · Answer 1 · 2020-02-06T07:33:33+01:00

Answer and Explanation:

Fair value refers to the current market price of the asset while historical cost is the cost at which the asset was acquired. Fair market value will always be higher than historical cost so it reflects the actual worth of the asset.

One of the qualities that makes valuing current assets at fair value rather than historical cost is the availability and reliability of current market price or fair value of current assets.