Valuation of Non-Current Assets: Historical Cost vs Current Cost

Running head: COMPANY ACCOUNTING
Company accounting
Name of the student
Name of the university
Student ID
Author note

1COMPANY ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Conclusion.......................................................................................................................................4
Reference.........................................................................................................................................5

2COMPANY ACCOUNTING
Introduction
As per Para 67 of AASB 101, the term non-current assets include intangible. Tangible
and financial assets those are of long-term nature. However, it does not prohibit usage of any
alternate descriptions as long as meaning is clear. Para 6.4 of conceptual framework issued by
AASB stated that the bases of measurement or valuation for non-current assets can be segregated
as (i) historical cost and (ii) current cost. Para 6.6 to 6.18 states the requirement where the non-
current assets is measured or valued at historical cost whereas Para 6.19 to 6.46 states the
requirements where the non-current asset is valued at current cost (Aasb.gov.au 2019).
Discussion
Non-current assets valued at historical cost
Where the measures are based on the historical cost it provides the information regarding
incomes, expenses, assets and liabilities through usage of the information generated from event
or transactions those created them. Historical cost valuations for the non-current assets do not
considers and reflect the price changes. However, it reflects the changes created from
impairment or consumption of the assets. Historical cost is the value incurred for acquiring or for
constructing the asset including the transaction cost, if any, incurred. Historical value is only
adjusted while the economic resource is consumed that constitutes the amortization or
depreciation or part of historical cost is not recoverable (Aasb.gov.au 2019). Carrying amount of
the non-current asset subsequently is measured at amortised cost that reflects the changes if any
in the cash flow estimation including the assets impairment. As per Para 6.16, it is difficult to
determine the historical costs while no observable price for transaction regarding the assets are