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Cost may include the cost of borrowing to finance construction if this policy is consistently adopted. The historical cost is then depreciated: it is systematically reduced to the recoverable amount, over the estimated useful life of the asset, to reflect the asset's usage. The depreciation (reduction of historical cost) is charged to expense. [5]
Law of Indonesia is based on a civil law system, intermixed with local customary law and Dutch law.Before European presence and colonization began in the sixteenth century, indigenous kingdoms ruled the archipelago independently with their own custom laws, known as adat (unwritten, traditional rules still observed in the Indonesian society). [1]
a) Historical cost principle (Kieso, Weygandt and Warfield)p38 – the only time this principle reflects cost is at the initial time of purchase or acquisition. In subsequent periods, the historical cost along with taxation-driven depreciation methods does not help managers determine their current operational cost factors.
Historical cost principle: requires companies to account and report assets' and liabilities' acquisition costs rather than fair market value. This principle provides information that is reliable (removing opportunity to provide subjective and potentially biased market values), but not very relevant. Thus there is a trend to use fair values.
In sum, Radbruch's formula argues that where statutory law is incompatible with the requirements of justice "to an intolerable degree", or where statutory law was obviously designed in a way that deliberately negates "the equality that is the core of all justice", statutory law must be disregarded by a judge in favour of the justice principle ...
Assets should always be recorded at their cost, when the asset is new and also for the life of the asset. For instance, land purchased for $30,000 is appraised at the much higher value because the housing market has risen, but the reported value of the land will remain $30,000.
In historical cost accounting, historical cost is the original monetary value of an economic item. Depreciation affects the carrying value of an asset on the balance sheet. The historical cost will equal the carrying value if there has been no change recorded in the value of the asset since acquisition.
In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory. Normally, ending inventory is stated at historical cost . However, there are times when the original cost of the ending inventory is greater than the net realizable value , and thus the inventory has lost value.