Which of these is the strongest argument in favour of current replacement cost as an alternative to historical cost?
A) Current replacement cost provides a more reliable measure of performance
B) Current replacement cost provides a more relevant measure of performance
C) Current replacement cost provides a more reliable balance sheet
D) Current replacement cost provides better information on cash flows

Question

Quizplus · Accepted Answer

Current replacement cost provides a more relevant measure of performance because it reflects the current market value of assets and takes into account changes in prices, while historical cost measures the original cost of acquisition and may not accurately reflect the current value of assets. This makes current replacement cost a better option for decision making and evaluating performance. The other options (A, C, and D) may still hold some value, but they are not as strong as the argument for relevance.

Which of These Is the Strongest Argument in Favour of Current