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Historic Cost Versus Fair Value


Author Info

  • Mariana Man

    (the University of Petroaani, Romania,)

  • Bogdan Rivas

    (the University of Petroaani, Romania,)

  • Liana Gadau

    (the “Valahia” University of Targoviste)

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    The value of accounting registering based upon historic cost is a sure and checkable value, written in a document that certifies a property right upon a certain good, a debt right or a debt. Historic costs’ evaluation consists in registering goods in-comings into the company’s patrimony at their buying cost, namely their historic cost, with no further modification although the real value changes. Fair value is the foundation of IFRS referential which displays basic principles, largely inspired by US GAAP, although they are not mentioned by them. Fair value evaluation is opposed to the principle of prudence, one of the main principles of French accounting law (also taken over by Romanian accounting standards) owing to which only possible losses are registered while potential profits are ignored. The issues that occur refer to the impact of the evaluation according to the fair value upon the accounting data of the company, namely upon the balance sheet and the results account drawn out on the basis of the fair value registrations. At the same time, the evaluation according to the fair value has determined a new foundation in displaying a company’s performance. This issue determines the following question: “Which is closer to the truth and more credible? A result calculated according to the fair value or one which is founded upon historic cost?”

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    Bibliographic Info

    Article provided by Czestochowa Technical University, Department of Management in its journal Polish Journal of Management Studies.

    Volume (Year): 4 (2011)
    Issue (Month): 1 (September)
    Pages: 1-238

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    Handle: RePEc:pcz:journl:v:4:y:2011:i:1:p:135-150

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    Related research

    Keywords: historic cost; fair value; International Accounting Standards (IAS); International Financial Reporting Standards (IFRS); accounting data; accounting principles; performance;


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