An alternative method of historical cost accounting; a system of valuing assets based on their replacement cost rather than their cost when purchased or produced. Charges to the profit and loss account, for inventories sold and the depreciation of fixed assets, are based on the value of assets to the business at the date they are used. Balance-sheet values of non-monetary assets are stated at their value to the business at balance date. Adjustments are required to depreciation, cost of sales, working capital and gearing, and are reflected in the balance sheet as a current cost reserve. See also: accounting standard, historical cost accounting, inflation accounting.
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