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historical cost

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

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June 14, 2014 at 9:09 pm #176575
gabriell
Member
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Hi,
Why in falling prices the historical convention is overstate asset value? It must be understated because prices are falling down
June 15, 2014 at 8:53 am #176598
John Moffat
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Historical cost shows the assets at original cost less depreciation. If prices are falling, then current cost will be lower than original cost. So historical cost will show too high a price – i.e. overstated.
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