Question

Historical Cost measurement per IAS 16

Guys, could somebody explain how generation of cash by PPE and historical cost provides the most relevant info is interrelated in following statement ?

Many items of property, plant and machinery generate cash flows
indirectly, by being used in combination with other assets to produce
goods for customers. As such, the Conceptual Framework notes that
historical cost is likely to provide the most relevant information.

Answer 1

Hi, I reckon that measuring assets at historical cost can provide relevant information that can be used to derive margins and cash flows achieved during that period. See para 6.30 in the Conceptual Framework document.