What does valuation in accounting primarily depend on?

Valuation in accounting primarily depends on historical costs because this approach focuses on the actual costs incurred when assets were acquired or liabilities were incurred. The historical cost principle ensures that assets and liabilities are recorded at their original purchase price, providing a reliable and objective basis for measurement. This principle is foundational in accounting because it maintains consistency and comparability across financial statements, which is essential for stakeholders analyzing a company's financial health.

While market trends, future predictions, and current economic conditions can influence valuation, they often come in the context of measuring or assessing the value of certain assets or liabilities. However, the primary basis for valuation under traditional accounting standards remains rooted in historical costs, reflecting the amounts that were originally paid and providing a clear, documented financial snapshot.