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Current value accounting is the concept that assets and liabilities be measured at the current value at which they could be sold or settled as of the current date. This varies from the historically-used method of only recording assets and liabilities at the amounts at which they were originally acquired or incurred (which represents a more conservative viewpoint).
The reason for using current value is that it provides information to the readers of a company's financial statements that most closely relates to current business conditions. This is a real concern when reviewing the financial statements of older companies that may have assets and liabilities on their books from many years in the past, but is less of an issue for newer companies where this is not the case. It is a particular problem when a business has older inventory or fixed assets whose current values may differ sharply from their recorded values.
Current value is also of use when there has been a prolonged period of excessive inflation. Under these conditions, the historical values at which assets and liabilities were recorded will likely be much lower than their current values.
Recording assets and liab at there current replacement value.
