The fundamental purpose of accounting systems is to present the economic reality of a corporation so that investors can make informed decisions. Accounting profession principles give priority to the concepts of objectivity, conservatism, and reliability in defining a corporation’s economic situation. The common practice in Generally Accepted Accounting Principles, as distinct from current-value accounting, is to value the firm based on its historical costs, its original book values. Thus, while historical cost information is generally reliable, it is inherently outdated for all but start-up firms.

The U.S. Financial Accounting Standards Board (FASB) has stated that the conceptual framework for the reporting of accounting information is that it must meet two primary qualitative characteristics: relevance and reliability. However, because business environments are often volatile and change rapidly, ...