ACCA FR Syllabus A. The Conceptual And Regulatory Framework - Advantages and disadvantages of historical cost accounting - Notes ^{3 / 4}

Cost is known and can be checked to an invoice

Enhances comparability

Leads to stable, non-volatile pricing

Non-current asset values become quickly out of date

Depreciation charge is unrealistically low

Lower costs lead to higher profits - which may lead to too high dividends in real terms

Comparisons over time are impossible

Users are often interested in current values not past e.g. security on loan