Cost-Accounting Method Law and Legal Definition

Cost-accounting method means an accounting method where the value of assets is recorded in terms of their cost. For example, the value of assets is calculated on the basis of volume such as the number of units produced, the direct labor hours, or the production machine hours.

Generally, cost-accounting method is a legitimate method to account for investments. The cost accounting method has an advantage over equity method of accounting when there is no fair, easily determinable value for the investment. However, in order to account for investments, the cost-accounting method is used in the following situations:

if the investment is such that there is no substantial influence of the investment holder over the company invested in, or

if there is no readily determinable fair value of the investment.