Standard Setters Case Study
a) In your opinion, why do standard setters require measurement methods other than traditional historical cost accounting?
At the beginning, traditional historical cost accounting practice were designed to allocate financial results across reporting periods and record the outcome of transactions. Under this approach, revenue is recorded when it is realized while expenses are matched in the same reporting period as revenue. However, in 1980s accounting standard setters began to shift away from this approach because the combination of historical cost and loss recognition impacted financial results to be separated from economic reality. Other than that, standard setters prefer measurement methods due to the fact that historical cost accounting
At the beginning, traditional historical cost accounting practice were designed to allocate financial results across reporting periods and record the outcome of transactions. Under this approach, revenue is recorded when it is realized while expenses are matched in the same reporting period as revenue. However, in 1980s accounting standard setters began to shift away from this approach because the combination of historical cost and loss recognition impacted financial results to be separated from economic reality. Other than that, standard setters prefer measurement methods due to the fact that historical cost accounting