Final answer:
The cost basis is defended for its objectivity, reliability, and verifiability in financial accounting. It offers a historical and stable point of reference for asset values that avoids speculative measures that could be prone to manipulation.
Step-by-step explanation:
The cost basis for accounting has been defended for its objectivity, reliability, and historical quantification compared to other valuation methods. This basis avoids the speculation and volatility associated with fair market valuations.
One primary defense lies in its verifiability where cost represents an actual transaction at a specific point in time, providing an unambiguous and concrete reference point. This directly addresses potential manipulations that could arise from more subjective measures of value.
Moreover, consistency is another chief defense, as the cost basis provides comparability across financial periods, enabling straightforward tracking of asset values. As businesses evolve, cost accounting serves as a starting point for depreciation and amortization processes. While recognizing its limitations in terms of reflecting current market conditions, the cost basis is still valuable due to its foundational role in the accounting framework.