Alternative Valuation Methods A friend of yours who had a bookkeeping course in high school and who is currently a business major says, “I thought that assets were always reported at their historical cost on a company’s balance sheet. Recently, however, I heard several accounting majors discussing ‘alternative valuation methods’ for measuring the value of assets. I know that historical cost is the exchange price paid for an asset, so I cannot understand how there can be any other ‘value’ for the asset.”
Write a short memo that identifies and briefly explains the valuation methods (other than historical cost) that a company could use to measure the value of an asset. For each valuation method, include in your discussion examples of assets whose values are often reported based on the use of that method.