HISTORICAL COST CONVENTION Definition

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HISTORICAL COST CONVENTION is that assets are recorded at their initial cost and are not subsequently revalued upwards, and liabilities valued at the amount initially received in exchange for the obligation. The relevance of the convention is that figures remain objectively based on verifiable figures, but in times of high inflation historical cost can become a dubious convention to follow.

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PREEMPTIVE RIGHT is the right of a current stockholder to maintain the percentage ownership interest in the company by buying new shares on a pro rata basis before they are issued to the public.

LIFFE is the London International Financial Futures and Options Exchange.

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