Debate between Fair Value Accounting (FVA) and Historical CostAccounting (HCA): A Literature Review

Abstract

Accounting is an information system as well language of business. Due to globalization and regulatory pressures, accounting has to
serve different purposes, so as to modify itself regarding principles, valuation techniques, and something like that. To satisfy the
interested parties, FASB and IASB have been announced a new principle to measure some assets and liabilities of the companies
through fair value model alongside with traditional historical cost model. From the inception of fair value model, some researchers
welcome it and some were not. For many significant reasons, fair value model has been criticized. In this paper, an extensive literature
review has been conducted to unveil the debate between FVA and HCA. It is found that, both methods have appeal in their own field
depending on the interests of the users of the methods. Nevertheless, the authors choose fair value accounting over historical cost
accounting in this study.