The Measurement of Current Cost Data: Implications for Economic Analyses

Many researchers, users, preparers, and regulators of financial and economic data are advocating the utilization of enhanced valuation models to improve both macroeconomic and microeconomic analyses. The purpose of this article is to review and analyze the research on the measurement of current cost (CC) data in the financial accounting and reporting literatures. This review includes an analysis of the accounting research on the measurement of CC data for new assets, used assets, and depreciation. The research suggests that, in general, an overstatement bias exists in the CC estimates of industrial machinery and equipment. This bias, however, could be substantially reduced or virtually eliminated by the adoption of a tax adjusted fundamental value (FV) model. These findings should be useful to economic researchers and economic policy institutions in their attempts to measure the capital stock, projected capital expenditures, and capital consumption adjustments for various firms, industries, and the economy as a whole.