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The historical cost accounting convention.

Date Submitted: 01/03/2004 17:13:25
Category: / Business & Economy / Accounting
Length: 8 pages (2292 words)
INTRODUCTION Realised-profit, matching-based, historical cost accruals accounting (HCA) has for over fifty years been repeatedly challenged as being an inadequate basis for the measurement of "income" which reports increments in the value of businesses. Such challenges continue unabated and are made by both accounting standards regulators and by academic commentators. Despite its obvious deficiencies for measuring valuation based income, and subject to concept of prudence, internationally HCA remains the dominant basis for reporting and share …
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…it. Historical Cost Accounting has been consistently used in USA for a number of decades. In the UK, the use of historical method is very inconsistent and is applied with moderate modification. A consistent effort is needed from the accounting bodies to develop a foolproof method, which can effectively take over the traditional historical method. Until then historical Cost Accounting will remain one of the oldest and controversially dominant method for measurement of corporate performance.
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