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cost concept

25 May 2018

while measuring the performance of a fixed asset, will the historical cost or the current cost of the asset will be taken as the base? Why?

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CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 25 May 2018

For measuring the performance of fixed assets, historical cost will be taken as base because Historical Cost Convention requires assets to be recorded at their historical value unless it is prudent to recognize a lower value (e.g. due to impairment).Historical Cost is therefore the default value assigned to assets.

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