Historical cost
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Original acquisition cost of an asset, which generally serves as the measurement basis for non-financial assets.
Historical cost in plain English
Historical cost means you record an asset at what you actually paid for it — and then usually leave that number alone, even years later when it might be worth more or less. If a bakery bought its oven for $8,000 in 2020, the books still say $8,000 (minus wear-and-tear), not whatever a used oven sells for today. Accountants like this because the original price is a real, verifiable fact with a receipt behind it, whereas 'what it's worth now' is often just a guess. It's the default measuring stick for physical things like buildings and equipment.
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Practice Historical cost
Which PP&E measurement choice is available under IFRS but generally not under U.S. GAAP?
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