Question：Which of the following is an advantage of current cost accounting(CCA)?
A.It uses objective calculations to arrive at a deprival value for assets.
B.It provides a useful guide for management in deciding whether to hold or sell assets.
C.It is easy to calculate and understand.
D.It produces a reliable value for total assets.
The correct answer is:B
An advantage of CCA is that it provides a useful guide for management in deciding whether to hold or sell assets.However this is not the focus of CCA,which is to provide a reasonable means of incorporating the effect of inflation in a company's financial accounts.
CCA uses subjective calculations to arrive at a deprival value for non-current assets.Calculation of economic value and net realisable value are based on estimates.
CCA uses a number of different asset valuation methods,namely replacement cost,economic cost and net realisable value.Grouping together assets valued by different methods does not give a particularly meaningful total figure.
By using a number of different asset valuation methods CCA is not that easy to calculate or understand.