The Transition From Historical Cost to Fair-Value, A Choice With Major Implications in Accounting

Ilie Răscolean () and Ileana-Sorina Rakos ()
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Ilie Răscolean: University of Petroşani, Romania
Ileana-Sorina Rakos: University of Petroşani, Romania

Annals of the University of Petrosani, Economics, 2016, vol. 16, issue 1, 233-244

Abstract: This paper treats the importance of the transition from valuation at historical cost to valuation at fair value of the assets within an economic entity, and the contents of the result obtained in financial reporting. The work deals with the influence that the fair value assessment can have on the level of an entity’s economic performance. Starting from a few statements such as: fair value option evaluation to influence significantly the fair value; presentation of the elements on the balance sheet at fair value leads to significant changes in the accounting of the economic entities, in data analysis was used a questionnaire based on the four questions whose results were analysed and which have led to carrying out this study. The research was supported by the information collected from individuals and companies within certain economic entities. The paper ends with the conclusions of authors related to the fair value assessment which, as if trying to address the shortcomings of historical cost, by aiming to correct cost of customer acquisition assets with market value, achieved through constant reevaluation of the balance sheet items. On the other hand, a concurrent evaluation of both historical cost and fair value, depending on the inherent characteristics of the elements of the balance sheet, resulting in getting relevant, reliable financial statements, in accordance with reality.

Keywords: historical cost; creation of value; assessment; fair view; accounting principles; accounting rules; financial situations; fair amount (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2016
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