The historical cost is the actual expenditure on the acquisition of fixed assets, excluding any cost adjustment, change or asset depreciation, depreciation, etc. after the acquisition of assets.In the analysis and evaluation of the renewal decision of fixed assets, the "value" of existing fixed assets should be calculated according to its "current value" rather than its "original cost".[1]
Chinese name
Original cost
Foreign name
Historical Cost
Features
The original cost can be verified
Advantages
More similar to the asset value at the time of asset acquisition
Also calledhistorical cost Actual cost.Cash paid orCash equivalentsAmount of.liabilitiesThe amount of cash or cash equivalents received for exchange or to be paid for repayment in normal operating activities.
Assets are generally recorded at the exchange price at the time of acquisition at the beginning, so the original cost of assets generally refers to the acquisition cost, which is the total amount of exchange price paid to acquire an asset and make it suitable for its intended use.This total amount or its unamortized amount is listed infinancial statementsMedium.
The original cost accounting model takes the original cost asMeasurement attributeAnd the original cost is regarded as the general principle of recognition, measurement and reporting of accounting elements.Under this accounting model, all economic transactions and events are recorded at the original cost.All assets are written off at original cost.All kinds of equity are measured in the amount of currency actually received or promised to be paid at the time of business.The product cost is also calculated according to the original cost.In this way, the whole accounting is based on the original cost.
Advantages and disadvantages
Announce
edit
Advantages and disadvantages of original cost measurement attributes
Main advantages
Original cost is a basic principle for accounting measurement and recognition
The main advantages of the original cost measurement attribute are: (1) The original cost is objectively determined through normal transactions in the market, rather than subjective assumptions.
(2) The original cost can be verified.
(3) The original cost is closer to the asset value at the time of acquisition.
(4) The original cost data is easy to obtain and consistent with the realization concept of income measurement.
Main disadvantages
The main disadvantages of the original cost measurement attribute are:
(1) Since the value of assets often changes, after a long period of time, the original cost as the measurement attribute of the available assets of the enterprise lacks great significance.
(2) The original cost cannot make it possible to recognize the actual period of gains and losses.
(3) Since the value of assets is changing all the time, the cost of acquiring assets in different periods isBalance SheetTaken together early, it lacks interpretability.
Simple explanation of original cost
The original cost refers to the actual cost when the asset is acquired, also known as the historical cost. It refers to all the actual expenses incurred by the enterprise to purchase, manufacture or construct various assets. For example, if a fixed asset is purchased, its original cost is the invoice price plus all the expenses incurred before the asset can be put into use, such as packaging and transportation costs, installation costs, etc.Replacement costIt refers to all expenditures for re purchasing or building assets with the same production (service) capacity.When revaluing fixed assets or calculating depreciation of fixed assets, consideration must be given to the cost of re purchasing or building and installing new fixed assets with the same production capacity.
The determination of the original cost is generally based on the market exchange price when the transaction is established.Because the data is easy to obtain and can be verified, it has always been regarded asassets valuation The most basic standard of is also applicable to the valuation of liabilities and equity.The original cost valuation can reflect the financial status and operating results of the enterprise more truly and objectively, which is incomparable with other valuation standards.However, when the price fluctuates continuously, the information priced at the original cost cannot correctly reflect the financial situation and operating results of the enterprise.Other valuation standards developed in recent years, such as replacement cost, make up for the limitation of original cost valuation.For a long time, our country has adopted the original cost valuation, but in the work of asset and capital verification, replacement cost is also often used.The development of market economy puts forward higher requirements for accounting measurement, and valuation standards other than original cost are also very important.
Related introduction
Announce
edit
Challenge
Original cost accounting process
The generation, application and continuity of the original cost principlemanagementThe concepts are closely related.First of all, under the condition of sustainable operation, various assets owned by enterprises can be regarded as inputs for enterprises to earn future income. It is generally believed that they will only be consumed, sold or transferred in the normal course of business, and rarely exit the normal business cycle of enterprises halfway.Therefore, compared with the current price of such assets, their cost information is more relevant, because these costs need to be recovered through operation.Secondly, under the condition of going concern,resourcesThe financial information most concerned by both the provider and the enterprise management is the income information.For resource providers, benefitsinformationIt is helpful for resource providers to understand how much return they can get in the current period, and under the assumption of stable going concern, investors can roughly calculate the future earnings from the current earnings, and then estimate the value of the enterprise.For enterprise management authorities, the reason why they are most concerned about income information is that income information is conducive to relieving their fiduciary responsibility.For this kind of information, reliability is the most important quality requirement.The reliability of accounting information as the basis of historical cost is unparalleled.Therefore, choosing the historical cost principle as the valuation basis becomes an inevitable choice to adhere to the going concern assumption.With the dramatic changes in the accounting environment, the demand of information users for accounting information is becoming increasingly complex, resulting in the gradual loss of the advantages of the original cost principle, while the shortcomings are increasingly exposed.Under the condition of uncertainty of continuous operation, the demand of information users for income information has decreased, because their forecasting ability has declined.There are at least the following reasons for the decline of earnings information forecasting ability: (1) the uncertainty of accounting environment makes earnings information lack of a unified reference platform;(2) The income statement contains more and more one-off and contingent items due to uncertainty, which makes the income statementinformationIt doesn't seem too important;（3）intangible assetsThe proportion of investment in various enterprises is increasing, but nowaccountingThe strict recognition of the standards makes a large number of intangible asset investments costed;(4) In consideration of the principle of prudence, enterprises often report in advanceloss, which greatly reduces the importance of income statement information.
In sharp contrast to income information, people are increasingly concerned about the information about enterprise value, that is, the current value of various economic resources within the enterprise.This is because in the 21st century, the accounting entity is facing an economy with increasingly fierce competition and increasing risksEnvironmental Science。Specificallyeconomic globalization, commodity priceinterest rateandexchange rateThe changes are violent and capricious;With the rapid development of technology, the equipment of products will soon become outdated, and the market share or marginal profit occupied will be taken away by competitors in a flash, thus greatly shortening the life cycle of products;A large number of complex financial businesses and financial innovation tools have emerged, makingfinanceThe market is more unpredictable and volatile.In such a risk environment, the good wish of continuous operation may be broken at any time, and the enterprise may be merged, liquidated or terminated at any time. A well run company may disappear in an instantlisted companyBankruptcy is a good example.Therefore, all non cash assets have great uncertainty, and only the information about the current market price of the subject can be credible.In order to fully understand the financial information of enterprises and reasonably estimate the business risks of enterprises, information users should not only pay attention to the income information, but also the current value information of assets, so as to provide a more objective reference standard for decision-making to calculate the original cost.
influence
The principle of original cost valuation is the product of industrial economyTangible assetsIs determined by the characteristics of.The business objective of enterprises is to maximize wealth, but in different times, people's understanding of wealth is different.stayAgricultureIn the economic era, "land is the mother of wealth";stayIndustryIn the economic era, machinery and industrial productionraw materialIt becomes a capital form that is urgently needed, namelymachineTangible assets such as raw materials are the most important wealth in the era of industrial economy.The usefulness and scarcity of tangible assets determine that they can be used for market exchange, so the amount of wealth they represent can only be determined by the price of market transactions.However, for tangible assets that are not obtained through market transactions but are mined or manufactured by enterprises themselves, the amount of wealth they represent is determined by the cost of mining or manufacturing itself.If this cost is higher than the market price of the equivalent asset, then the market price rather than the cost itself should be taken to represent the wealth.This is also the reason why traditional accounting adopts the original cost pricing principle based on transactions.
along withknowledge economyThe emergence of, people's awareness of the value of intangible assets, the rise and development of knowledge valuation and talent markets, and the emergence of new economies in enterprisesbusinessThe valuation basis of original cost has been shaken by business activities for the following three reasons:
First, the original cost principle is inadequate for the measurement of intangible assets represented by knowledge.In the era of knowledge economy, enterprises take knowledge capital as the source of increasing their wealth, and knowledge innovation as the driving force of their development.The proportion of intangible assets in enterprise assets has increased significantly, even in some casesHigh-techThe vast majority of assets in enterprises are intangible assets.However, if intellectual capital is valued at historical cost, it may only be the price of several books, or the entrusted training fees and other actual expenditures for acquiring knowledge, which undoubtedly distorts the value of intellectual capital.In fact, it is difficult to determine the historical cost of many intangible assets. For example, personal ideas can bring rich economy to enterprises without costinterest。Therefore, it is obviously wrong to ignore the measurement of such intangible assets.
Second, the emergence of derivative financial instruments has changed the traditional original cost pricing model.On the one hand, derivative financial instruments are expectedcontract, corresponding rights and obligations will be generated when signing, and since the transaction has not yet occurred, there is no historical cost to speak of naturally;On the other hand, any financial instrument will go through a period of time from the signing of the contract to the final closing and delivery. During this period, the market price of derivative financial instruments is constantly changing.If the price at the time of signing the contract is entered into, the market of derivative financial instruments cannot be reflectedriskThere is no way to talk about financial supervision.If we start from reflecting the changes in the true value of the business activities of the accounting entity, we should use the fair value or the current market price, which will inevitably require changing the traditional historical cost pricing principle.
Third, the frequent occurrence of enterprise mergers challenges the transaction based original cost valuation principle.When a merger occurs, the transaction value of the overall assets of the merged enterprise often greatly exceeds the sum of the historical cost values of the individual assets it contains.In order to deal with the huge differences in such transactions, accounting“goodwill”This concept.Since goodwill does not represent any asset in physical form, and it is difficult to realize its value through market transactions of individual physical assets, goodwill, as a special asset of the enterprise, is linked with the continuous operation of the enterprise itself.The financial accounting system stipulates that "some enterprises are merged orbuyGoodwill will be recognized only when.However, goodwill is not generated at the time of merger, but actually existed before the merger, which is something that the accounting based on the original cost valuation does not have and cannot reflect.The frequent occurrence of mergers and the emergence of huge goodwill are challenges to the original cost valuation principle.
metering
Original cost of human resourcesMeasurement of.The original cost of human resources includes the acquisition cost, development cost and use cost of human resources.These three kinds of costs are historical costs, which have clear records and are easy to measure.The acquisition cost includes recruitment cost, selection cost, employment cost and placement cost;The development cost mainly includes pre job education cost, post training cost and off job training cost;The use cost includes maintenance cost, incentive cost, coordination cost, etc.
