An Analysis of the Strengths and Weaknesses of Fair Value Accounting and Historical Cost Accounting Measures


Published: 2021-10-08

Page: 634-640

Yahaya Yusuf *

Department of Accounting, Usmanu Danfodiyo University, Sokoto, Nigeria.

Sani Idris

Department of Accounting, Umar Musa Yaradu’a University, Katsina, Nigeria.

*Author to whom correspondence should be addressed.


The paper conducts a comparative analysis on the basic pros and cons associated with the concept and application of Fair Value Accounting (FVA) and that of Historical Cost Accounting (HCA) as reported in the contemporary Accounting literature with a view to providing a nexus to the debate on the suitability of each concepts in shaping and directing the preparation and presentation of  financial information. The review therefore concludes that HCA is considered as easy to use, conservative, reliable and simple to understand by management and users of financial reports. However, the proponents of FVA consider historical cost accounting as obsolete, because it focuses on historic cost allocations rather than on realistic reporting of values even during times of significant changes. While the basic flaws of FVA is subjectivity and complexity.

Keywords: Fair value accounting, historical cost accounting, measurement

How to Cite

Yusuf, Y., & Idris, S. (2021). An Analysis of the Strengths and Weaknesses of Fair Value Accounting and Historical Cost Accounting Measures. Asian Journal of Economics, Finance and Management, 3(1), 634–640. Retrieved from


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