The accountant of Broken Bay Ltd decided to retain the historical cost of the entity's intangible assets because it was difficult to obtain fair value of these assets.This action is consistent with ____________.
A) substance over form
B) balancing of relevance and faithful representation
C) accrual accounting
D) cash accounting

Question

Quizplus · Accepted Answer

The decision to retain historical cost of intangible assets suggests that the accountant was balancing the relevance (importance) and faithful representation (reliability) of the information. This is a key principle in accounting, as financial statements must provide information that is both relevant and reliable for users to make informed decisions. The difficulty in obtaining fair value suggests that the information may not be entirely reliable if fair value was used, but historical cost is still relevant information for users to understand the entity's financial position. Therefore, the accountant's action is consistent with balancing relevance and faithful representation.

The Accountant of Broken Bay Ltd Decided to Retain the Historical