Current Cost for Long-Lived Assets: A Critical View.

Abstract The American Accounting Association Committee to Prepare a Statement of Basic Accounting Theory recommended that current-cost data be presented in financial statements in addition to historical-cost figures. There are some who have raised their doubts over the usefulness of these current-cost data, particularly where extended to include long-lived assets. This article attempts to expand the previously made arguments that current-cost data should not be presented in the financial statements. While the "objectiveness" of current-cost data may still be questioned, the arguments made here are not addressed to this issue by assuming that the figures can be objectively determined. The primary purpose of financial statements is to present information that will assist in estimating the value of the firm. Because it is impossible to estimate the value of a firm without, at least implicitly, evaluating the firm's management, and vice-versa, it can be said that for financial statement information to be relevant, and thus useful, it must aid the firm valuation/management evaluation process.