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Topic 9 - Coggle Diagram
Topic 9
Historical Costs
Disadvantages
Understatement of asset in times of inflation
Overstate the profit due to understating the expenses
Information for decision making is insufficient
Does not fulfill the objective of accounting
Advantages
Relevant in decision-making process
Historical cost have been found to be useful
Based on actual transactions
The integrity of the data is safeguarded against internal modifications
Fair Value
Advantages
True Income
Enhance comparability in financial statements
Accurate Valuation of Assets and Liabilities
Provide relevant information on timely basis
Disadvantages
Does not supply useful profit information
Information could be misleading to users
Non-compliant to matching concept
Fail to measure a company's actual performance
Fail to fulfil stewardship objective