Problem
Undervaluation of asset replacement costs
Other Names:
Inappropriate historical cost accounting Background:
Historical cost accounting is particularly inappropriate in hyperinflationary economies. Periodic revaluation of assets is allowed in some countries. This raises depreciation costs and lowers net income but reflects the current position of assets in the balance sheet. Incidence:
Historical cost accounting continues to have almost universal support and application. Within the past decade, however, a wide disparity between historical costs and current replacement costs of plant, equipment and inventories has developed. Broader Problems:
Imperfect accountingInaccurate forecasting Aggravates:
Insurance industry collapseLack of funding for infrastructureUndervaluation of community wealthDeteriorating physical infrastructure in citiesDisparity between share prices and underlying asset values Strategies:
Establishing cost accountingValuing asset replacement costsUndervaluing asset replacement costs Subject(s):
Commerce → FinanceCommerce → Accounting
Commerce → Purchasing, supplying
History → History
Related UN Sustainable Development Goals:
Problem Type:
F: Fuzzy exceptional problems Date of last update
14.06.2018 – 05:59 CEST