Harrod's Inc. purchased land for ₤55,000 in 2004. At December 31, 2014, an appraisal determined the fair value of the land is ₤65,000. If Harrod's follows the historical cost principle, in the 2014 financial statements, the land will be reported at

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The historical cost principle states that assets should be recorded at their original cost. Therefore, even though the fair value of the land has increased, Harrod's should report the land at its original cost of ₤55,000 on the statement of financial position. The land should not be reported on the income statement as it is a non-operating item.