Chapter 2, Problem 18Q

To determine

Measurement Principles: There are two measurement principles for accounting that the Generally Accepted Accounting Principles (GAAP) adopt, they are;

1. I. Historical cost principle
2. II. Fair value principle

The actual principle to be adopted depends on the outcome of the trade-offs between two factors, the relevance and the faithful representation.

To Discuss: The reason for not using fair value principle in all accounting measurement and reporting.