Decision-Useful Asset Measurement from a Business Valuation Perspective

32 Pages Posted: 11 Jan 2014 Last revised: 13 Mar 2019

See all articles by Christine Botosan

Christine Botosan

Financial Accounting Standards Board

Adrienna A. Huffman

The Brattle Group

Date Written: September 1, 2015


This commentary proposes an approach to asset measurement rooted in business valuation theory and practice. In the context of a business valuation, investors’ information needs and the asset measurement investors find useful vary with the manner in which the assets are expected to realize value for the firm. After reviewing arguments made in economic and accounting theory, accounting research, accounting standards, and practitioner and business valuation literature, we conclude that for in-exchange assets, investors need to determine the value expected to be realized in exchange. Exit price in a hypothetical market exchange (i.e. fair value) less expected costs to sell provides investors with decision-useful information in this regard; replacement cost and historical cost do not. For in-use assets investors require information useful in forecasting cash flows generated by using such assets in combination. Based on arguments and data presented in the aforementioned literature, we conclude that historical cost generally provides investors with decision-useful information for forecasting purposes; fair value does not. In addition, replacement cost can provide decision-useful information provided holding gains and losses are separately disclosed, but its decision-usefulness can be constrained by verifiability concerns.

Keywords: Asset measurement; Business valuation; Decision-useful financial reporting information; Value-in-use; Value-in-exchange; Conceptual framework

Suggested Citation

Botosan, Christine and Huffman, Adrienna A., Decision-Useful Asset Measurement from a Business Valuation Perspective (September 1, 2015). Accounting Horizons, Forthcoming, Available at SSRN: or

Christine Botosan (Contact Author)

Financial Accounting Standards Board ( email )

401 Merritt 7
PO Box 5116
Norwalk, CT 06856
United States

Adrienna A. Huffman

The Brattle Group ( email )

San Francisco, CA 9133
United States

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