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

Author

Listed:
  • Ilie Răscolean

    (University of Petroşani, Romania)

  • Ileana-Sorina Rakos

    (University of Petroşani, Romania)

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.

Suggested Citation

  • Ilie Răscolean & Ileana-Sorina Rakos, 2016. "The Transition From Historical Cost to Fair-Value, A Choice With Major Implications in Accounting," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 16(1), pages 233-244.
    • Handle: RePEc:pet:annals:v:16:y:2016:i:1:p:233-244
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    References listed on IDEAS

    as
    1. Maria MACRIS & Mariana MAN, 2014. "Approaches To The International Capital Flows In The Globalized Economy," Internal Auditing and Risk Management, Athenaeum University of Bucharest, vol. 36(1), pages 117-124, December.
    2. Mariana Man & Liana Gădău, 2011. "The Profit and Loss Account Through the Romanian Accounting Regulations. From European to International," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(2), pages 167-176.
    3. Mariana MAN & Ioan Constantin DIMA & Valentina MINEA, 2011. "Accounting And Fiscal Policies Regarding The Treatment Of Assets’ Depreciation – National And International," Internal Auditing and Risk Management, Athenaeum University of Bucharest, vol. 30(2(22)), pages 32-48, June.
    4. Mariana Man & Raluca Elisabeta Felea, 2007. "A Study Regarding the Re-treatment of the Balance Sheet and of the Profit and Loss Account under Circumstances of Inflation and Hyper-inflation Approached According to the Conception of International ," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 7, pages 225-242.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    historical cost; creation of value; assessment; fair view; accounting principles; accounting rules; financial situations; fair amount;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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