The historical cost of plant and equipment (not land) is also used to determine the amount of depreciation expense reported on the income statement. The accumulated amount of depreciation is also reported as a deduction from the assets' historical costs reported on the balance sheet. (In the case of impairment, some assets might be reported at less than the amounts based on historical cost.)
The use of historical cost is also a disadvantage to those users of the financial statements who want to know the current values.
Learn Accounting: Gain unlimited access to our seminar videos, flashcards, visual tutorials, exams, business forms, and more when you upgrade to PRO.