The use of gross book value (GBV) for measuring the level of investment in depreciable assets (for purposes of calculating return on investment, ROI) is preferred by those who value the objectivity of:
A) An historical cost number.
B) The depreciation process.
C) Price-level adjusted data.
D) The cost-allocation process.
E) Current-cost information.

Question

Quizplus · Accepted Answer

The use of gross book value (which represents the historical cost of an asset) emphasizes the objectivity of using an unadjusted, historical cost number. This can be particularly useful in circumstances where there is a lack of reliable current cost data or where price levels are subject to significant fluctuations. It also avoids the complexities associated with adjusting for changes in the value of money over time (price-level adjustments). The other choices are not relevant to the preference for using GBV.

The Use of Gross Book Value (GBV) for Measuring the Level