Explain the limitations of using historic cost accounting (HCA) as the basis for providing relevant and faithfully representative financial reporting information for investors, lenders and other creditors.

Topic: HW #1 Accounting

a) As the annual rate of consumer price inflation in the U.S. is currently rising by 8.5% per annum, explain the limitations of using historic cost accounting (HCA) as the basis for providing relevant and faithfully representative financial reporting information for investors, lenders and other creditors.

Within your answer highlight how alternative accounting measurement and valuation approaches, such as current value, exit value, current purchasing power, and discounted cash flow (DCF) might eliminate some of HCA’s shortcomings in providing useful information for end users.

Use our in-class discussion of alternative valuation techniques for Fred’s pineapple business, and the assigned readings for week 1, to support your assertions.

b) Hines (1991) has concerns about the role of accounting and accountants in providing greater accountability about environmental and sustainability issues and performance.

Required:
i) Using at least three direct quotations (i.e. in-text quotes from the source) from Hines (1991), briefly discuss her concerns with allowing accounting to be the dominant source of environmental reporting information. Explain whether you agree with her thoughts.
ii) Using quotations from two different articles published in the Business Source Premier (BSP) database at the Auraria Library since 2015, briefly explain how the accounting profession can, and is, contributing towards the development of improved forms of environmental and sustainability reporting and audit information.

In total, your written answer to part b) of HW1 must:
(a) Be at least one page long (excluding the list of references)
(b) Include at least four direct supporting in-text quotations from these sources:
• Hines (1991) – at least two direchoct quotations from this article.

Explain the limitations of using historic cost accounting (HCA) as the basis for providing relevant and faithfully representative financial reporting information for investors, lenders and other creditors.
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