Cost Constraint
Accounting glossary · Understand, connect, apply
The cost constraint recognizes that the benefits of financial information should justify the costs of producing and using it. Standard setters consider this when developing requirements.
Example
A reporting requirement may balance the usefulness of additional detail against the effort needed to collect it.
Remember the difference
The cost constraint is not blanket permission for an entity to ignore an applicable accounting requirement.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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