measurement

Question 1

is historical cost reliable or relevant

Answer 1

reliable

Question 2

is fair value reliable or relevant

Answer 2

relevant

Question 3

what are some pros of historical costs

Answer 3

reliability - able to use historical cost for forecasting

Question 4

what are some cons of historical cost

Answer 4

1. mismatching of revenue and exp (loss of relevance)
2. non-consideration of MV changes in assets and liabilities
3. additivity problem

Question 5

what are some pros of fair value

Answer 5

relevance - able to report current information, highlight opp cost, more comparability, consistency, additivity

Question 6

what are some cons of fair value

Answer 6

impaired reliability
excess income volatility
impairment of stewardship role