Fair Value and Cost Accounting, Depreciation Methods, Recognition and Measurement for Fixed Assets
Authors: Anastasios Tsamis , Konstantinos Liapis


In accounting and finance, fair value is a rational and unbiased estimate of the potential market price of a good, service or asset. On the other hand, cost accounting policy is more conservative and prudence. Accounting fairness refers mostly to the fair presentation, the initial recognition and measurement or valuation of an element. Therefore, adopting different accounting policies results in the assets being presented in the entity’s financial statements with different values. With the application of cost or fair value accounting policies across firms or countries, the financial statements are being incomparable.
Another issue arises from depreciation methods applied. With the application of different depreciation accounting methods across firms or countries, the financial statements are being incomparable. Both accounting policies for recognition and measurement and depreciation methods, determine the net value of fixed assets in financial statements’ presentations.
Thus, a decision-making procedure exists for recognition and measurement of property assets using the above components. The research objects of the paper are to explore in detail the relationship between cost and fair value accounting policies with depreciation methods, by enabling decision-making options.
The financial method of discounted cash flow (DCF) technique is used for fair value accounting as well as for impairment test and the depreciation accounting methods are used for cost accounting policy, in order to explore the decision options for a property asset recognition and measurement.
Following the above procedure, a fair value accounting model is correlated with the deprecation methods and an analysis of the impact of each decision-making alternative in financial statements’ figures is produced.

Key Words: Cost accounting; Fair value accounting; DCF; Depreciation methods;

JEL Classification Codes: M41

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