Historical cost
Historical cost measures an item using the transaction that originally gave rise to it, adjusted subsequently as the relevant standard requires. For an asset, initial cost includes qualifying acquisition or production amounts. Depreciation, amortisation and impairment may reduce the subsequent carrying amount. Historical cost contrasts with current value measurement bases but is not a rule that all balances stay forever at their original amounts.
Worked example
A machine initially costs $25,000; after $5,000 accumulated depreciation, its cost-model carrying amount is $20,000.
Common mistake
Historical cost is not necessarily the invoice amount alone, and using a cost model does not eliminate impairment or other required adjustments.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F3 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |