Question

Which accounting assumption or principle is being violated if a company reports its corporate headquarter building at its fair value on the balance sheet

Answer 1

Historical cost

Step-by-step explanation:

The historical cost principle is an accounting principle that states that an asset, liability or equity should be recorded at the cost it took to purchase the asset, liability or equity. The asset should be recorded at historical cost no matter the change in the value of the asset, liability or equity.

For example, if a car was purchased by a company at the cost of $50,000 in December 2020. If by January 2021, the asset now costs $55,000. The asset should still be recorded in the balance sheet of the company at $50,000

The asset, liability or equity can be recorded at fair value in the case of acquisition of the company or sale of the asset, liability or equity