Under which condition is fair value equal to historical cost?
Understand the Problem
The question is asking under which specific condition the fair value of an asset is equal to its historical cost. This examines the relationship between these two valuation methods of assets.
Answer
At the date of acquisition.
Historical cost is equal to fair value at the date of acquisition.
Answer for screen readers
Historical cost is equal to fair value at the date of acquisition.
More Information
At the date of acquisition, the fair value of an asset is typically equal to its historical cost because the transaction involves the original cash or equivalent value. Over time, fair value may diverge from historical cost due to market fluctuations.
Tips
A common mistake is confusing fair value and historical cost at times other than the acquisition date. Historical cost may not reflect current market conditions.
Sources
- Ch. 10 Practice Flash Cards - Quizlet - quizlet.com
AI-generated content may contain errors. Please verify critical information
