Final answer:
Fair value accounting values assets and liabilities at their current market price, while historical cost model values them at their original purchase cost.
Step-by-step explanation:
Fair value accounting and historical cost model are two different methods used to value assets and liabilities in financial reporting.
The historical cost model values assets and liabilities at their original purchase cost without adjusting for any changes in their fair value over time.
On the other hand, fair value accounting values assets and liabilities at their current market price, reflecting their fair value in the current market conditions.
For example, if a company owns a piece of real estate that has significantly increased in value since its purchase, fair value accounting would reflect this increase in value on the company's financial statements, whereas historical cost model would not.