Undervaluation of asset replacement costs

Inappropriate historical cost accounting
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.
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.
(F) Fuzzy exceptional problems