Accounting / Bookkeeping Basics: The Cost Principle

The Cost  
The cost principle (or the cost constraint, to be more correct) is the last of the officially-recognized generally accepted accounting principles - but not in any way the least important one.
We have just briefly touched upon a concept similar to the cost principle. Earlier, we said that when the costs of abiding by generally accepted accounting principles are too high, accountants have the possible option of omitting them.
The cost principle, also known as the cost/benefit principle or the cost/benefit constraint, states that the cost of providing information in your financial statements should be compared to the benefits of providing that information.
Now, this is a pretty tricky concept to grasp, precisely because it could lead to accountants and management to be tempted to omit certain negative information from their statements, stating that the information was too expensive to research and put together, as compared to the benefits of doing it.
It is, however, extremely important that you understand this constraint. Together with the materiality constraint, they lie at the very foundation of both generally accepted accounting principles and the constraints associated with them.
The cost benefit principle was not always followed. In the past, accountants informally tried to create some sort of balance between the cost of providing information and the practicality of doing  it. However, today, a lot of businesses apply the cost benefit constraint - so they analyze the benefits of providing certain types of information in their financial statement and measure it against the cost of doing it.

The Issue with the Cost Principle
The cost/benefit principle is, like all generally accepted accounting principles, simple in theory. But it can get very complicated when you go in-depth and try to apply it to real life situations.
The cost part of the cost benefit principle is easy. You pretty much just have to analyze the costs of collecting, researching, putting together, processing, analyzing, storing, auditing, and sharing data.
When it comes to the benefit part of the same principle, however, things can get very tricky, because it is difficult to quantify it. For instance, if the information you want to provide an investor will offer them the chance for an accurate assessment of the company’s financial situation, this is clearly a benefit and the information should be included. However, it is difficult to assign an actual value (numerical value, for that matter) to this benefit.
This entire issue makes the application of the cost/benefit principle a judgment call on the side of the accountants handling the situation. At all times, the concept of transparency should be applied, though - which means that you should not use the cost/benefit principle in an abusive way, to maneuver financial statements to the company’s major advantage.

Is the Cost Principle Applied at All Times?
No, the cost benefit constraint is not to be applied on all types of financial reports. The ones the cost benefit principle applies to are very clearly stipulated in the accounting standards - and in all of the situations excluded from that list, all of the financial data should be reported regardless of what the costs associated with this might be.
In reality, very few types of information are actually expensive to acquire and this means that there is a very small number of situations when accountants are allowed to actually forego and avoid reporting a situation.
The cost benefit constraint is there to help bookkeepers and management keep everything transparent and efficient for the company. It is, however, one of the generally accepted accounting principles you are not very likely to use very often, precisely because it is very well- constrained itself as well. Use it cautiously and always check with the official accounting standards when in doubt!