Historical Cost v Agreed Value

[Tragesty]

Can anyone come up with several points between these two? I'm trying to think of ways to discuss historial cost and agreed value but I can only think of:

• Historical cost is verifiable by source documents, and thus more reliable than the agreed value, which is an estimation
  The agreed value will be more relevant to the business in decision making
• Relevance trumps reliability in reports

That's all I can think of, anyone have anything else they can add? Greatly appreciated!

[StumbleBum]

Using agreed value for assets
In the above example the owner contributed an office desk to the business valued at $200. If
the business actually purchased the office desk from someone else, the historical cost of the
asset would be used and this would be supported by a source document such as an invoice
or cheque butt. However, in this case the business did not buy the asset. The owner originally
purchased the desk and has now simply contributed the asset from their personal resources
to the business entity. Therefore, there is no source document available to verify the cost of
the asset to the business. The owner may have a document to prove the cost of the asset
when it was first purchased for personal use. However, the item may now be several years old
and therefore its original cost has no relevance to the business. When a second-hand asset is
contributed to a business by its owner an estimate of its value is made in an attempt to provide
a relevant value for the balance sheet. This is known as the agreed value of an asset and it is
based on a reasonable estimate of its current market value. Usually a business owner would
make this estimate under the advice of their accountant and/or an expert in the appropriate
field. For example, published guides are available to assist an owner when estimating the value
of a second-hand vehicle. It is important to appreciate that such estimates will not satisfy the
demands of reliability as there are none of the usual source documents available to verify the
actual value of the asset at the time it was contributed to the business. However, in order to
satisfy the demands of relevance, a reasonable estimate may be adopted as the agreed value of
an asset so that meaningful information can be reported in the balance sheet of the business.

This will hopefully help, it is an extract from the Macmillan Accounting book of this year.