Historical Cost Method - Assets Don't Gain Value?

by nyakato irene sarah
(kampala, Uganda)

I think this method should be changed by GAAP because, as discussed above, the historical cost method does not give the current value of the asset. I think the historical cost shows that the asset does not gain value on the financial statements, yet we know every asset has to either gain or lose value depending on the prevailing market price and the usefulness of the asset.

The problem will depend on the type of asset. Fixed assets like land, building, usually gain value and fixed assets like machinery and motor vehicle lose value due to depreciation. There fore much as we advocate for the fair value as means of recording we should not ignore the historical method either.