Question

Comparing and contrasting the historical cost ]principle and current (fair) market value, is knowledge of an asset's current market value ever useful and, if so, when?

Answer 1

Historical cost accounting and Current market, or fair value, accounting are two methods used to record the price or value of an asset. Historical cost measures the value of the original cost of an asset, whereas mark to market measures the current market value of the asset.

As per US GAAP Historical cost accounting is an accounting method in which the assets listed on a company's financial statements are recorded based on the price at which the assets were purchased.This method is based on a company's past transactions and is conservative, easier to calculate and reliable.the historical cost principle accounts for the assets on a company's balance sheet based on the amount of capital spent to buy the asset.
However, the historical cost of an asset may not be relevant. For example, if a company purchased a building 60 years ago, the market value of the building could be worth a lot more than the balance sheet indicates.

Fair value accounting is a financial accounting approach that companies use to report their assets and liabilities at estimated prices, which they would receive if they were to sell the assets or the liabilities they would pay if they were to be alleviated of their liabilities.

Current (fair) market accounting aims to make financial accounting information more accurate and relevant.