Fair value vs. historical cost is an accounting principle that states that assets and liabilities be recorded on a balance sheet at the current price of the asset or liability, regardless of when it was acquired. By contrast, historical cost refers to the original acquisition price as recorded in the books. This debate is important for investors, who need to understand how a company is recording its assets and liabilities and what the true financial position of the company is. Fair value enables investors to understand the current and future value of a business’s assets and liabilities, while historical cost can provide important information about past performance.