Question：Which of the following is an advantage of current cost accounting (CCA)?

　　A. It uses objective calculations to arrive at a deprival value for assets.

　　B. It provides a useful guide for management in deciding whether to hold or sell assets.

　　C. It is easy to calculate and understand.

　　D. It produces a reliable value for total assets.

　　The correct answer is: B

　　An advantage of CCA is that it provides a useful guide for management in deciding whether to hold or sell assets. However this is not the focus of CCA, which is to provide a reasonable means of incorporating the effect of inflation in a company's financial accounts.

　　CCA uses subjective calculations to arrive at a deprival value for non-current assets. Calculation of economic value and net realisable value are based on estimates.

　　CCA uses a number of different asset valuation methods, namely replacement cost, economic cost and net realisable value. Grouping together assets valued by different methods does not give a particularly meaningful total figure.

　　By using a number of different asset valuation methods CCA is not that easy to calculate or understand.