Financial Statements Should Provide Information That Is Both Relevant and Reliable.The

question 22

Essay

Financial statements should provide information that is both relevant and reliable.The current model upon which financial statements are based is the historical cost model.Over the past fifty years,however,various individuals and groups have advocated the implementation of current value models of accounting.One such model represents the amount of cash for which an asset might be sold or a liability might be refinanced,sometimes referred as the current-exit-price approach.The current exit price is generally agreed to correspond (1)to the selling price under conditions of orderly rather than forced liquidation,and (2)to the selling price at the time of measurement.All assets and liabilities are thus revalued at their exit prices at each reporting date.
Required:
Evaluate the historical cost and current-exit-price models in terms of relevance and reliability.

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Definitions:

Noise Level

The measurement of the ambient level of sound, often referring to the background sound present in a given environment.

Internal Validity

The degree to which a study’s results are attributable to the independent variable, rather than other factors, indicating the study accurately reflects the relationship being tested.

Confounding Variable

An external influence that can affect the results of an experiment by varying along with the independent variable, potentially misleading the outcome.

Pretest-Posttest

A research design involving measurement before and after a specific intervention to assess its effects.