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:

Labeling Theory

A sociological theory suggesting that deviance and conformity result not so much from what people do, but from how others respond to those actions.

Social Interaction

Social interaction is the process by which individuals act and react in relation to others, shaping their behavior through mutual exchange and influence.

Impute Meanings

The act of assigning or attributing significance, interpretation, or value to something based on personal perceptions or cultural norms.

Labeling

The process of classifying or identifying individuals or groups based on specific characteristics, often leading to stereotyping or stigma.