Historical Cost
- Dennis Daggett (Deactivated)
The cash (or cash equivalent) price of acquiring ownership of a capital asset (purchase price), bringing it to the location (any freight and transportation), and placing it in a condition (alteration or installation) necessary for its intended use. The aggregate of these costs is allocated to the cost of production in future accounting periods through the depreciation process. Any future costs related to that capital asset (such as additions, improvements, relocation, replacement of parts, etc.) are added to the historical cost (or original cost) only if those future costs provide future (greater than one year) service potential for the capital asset; otherwise, those future costs are expensed in the time period in which they are incurred. (II-1, 12-13, 25, 42-44; III-8-10)
Authorization Path: 2.2.5.2.43.1