By permitting some classes of assets to be valued at cost and others at fair value the AASB has:
A) removed any confusion regarding the total balance of non-current assets.
B) forced entities to accurately reflect their true financial position at any point in time.
C) created a situation where the total asset figure may be a combination of cost and fair value assessments, reducing its meaningfulness.
D) removed the opportunity for managers to act in their own self-interest as suggested by Positive Accounting Theory.

Question

Quizplus · Accepted Answer

Allowing different classes of assets to be valued at cost or fair value creates a situation where the total asset figure may be a mix of both methods, reducing its meaningfulness. This can make it difficult for users of financial statements to compare the financial position of different entities. However, this approach may still be useful to provide relevant information about specific assets and their values.

By Permitting Some Classes of Assets to Be Valued at Cost