Historical Cost Is the Primary Basis for Asset Valuation Under

question 18

Multiple Choice

Historical cost is the primary basis for asset valuation under U.S. GAAP. Why is historical cost NOT as important in the accounting systems of Latin America as in the U.S.?

• A) Historical costs are too difficult to calculate in the currencies used in Central and South America.
• B) The countries of Latin America have experienced very high rates of inflation, which would make historical costs meaningless to readers of financial statements.
• C) There is very little foreign direct investment in the countries of Latin America, so few assets need to be accounted for.
• D) In Latin America, asset prices are very stable, making historical costs equal to replacement costs, so it doesn't matter which valuation basis is used.

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Definitions:

Cross-Functional Team

A team that operates with members who come from different functional units of an organization.

Horizontal Structure

A form of organizational structure where control and decision-making are spread horizontally across levels, emphasizing collaboration and teamwork.

Divisional Structure

An organizational structure where operations are grouped based on divisions or business units, with each division typically focusing on a particular product line or geographical market.

Functional Structure

An organizational configuration that divides the company based on specialization, where each organizational unit performs a specific function.