Historical Cost

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Dictionary Says

Definition of 'Historical Cost'

A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the U.S. under generally accepted accounting principals (GAAP).
Investopedia Says

Investopedia explains 'Historical Cost'

Based on the historical-cost principle, under U.S. GAAP, most assets held on the balance sheet are to be recorded at the historical cost even if they have significantly changed in value over time.

For example, say the main headquarters of a company, which includes the land and building, was bought for $100,000 in 1925, and its expected market value today is $20 million. The asset is still recorded on the balance sheet at $100,000.

Not all assets are held at historical cost. For example, marketable securities are held at market value on the balance sheet.
Search results for

'Historical Cost'

  • Financial Statements: Who's In Charge? | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements1.asp
    ... both. For example, real estate is carried on the balance sheet at historical
    cost because this historical cost is reliable. That ...

  • What You Should Know About Inflation

    http://www.investopedia.com/articles/01/021401.asp
    ... 33, which contended that "inflation causes historical cost financial statements
    to show illusionary profits and mask erosion of capital.". ...

  • CFA Level 1 Study Guide - Financial Statements - Balance Sheet ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-statements/balance-sheet-components-assets.asp
    ... Demand; 3.3 Price Elasticity; 3.4 Elasticity of Demand; 3.5 Elasticity of
    Supply; 3.6 Marginal Benefit and Marginal Cost; 3.7 Market ...

  • 12 Things You Need To Know About Financial Statements

    http://www.investopedia.com/articles/basics/06/financialreporting.asp
    ... For investors, a basic understanding of at least two of these conventions - historical
    cost and accrual accounting - is particularly important. ...

  • Free Markets: What's The Cost?

    http://www.investopedia.com/articles/economics/08/free-market-regulation.asp
    ... creates nothing but a big bureaucracy that increases the cost of doing ... When Free
    Markets: Triumphs and Tribulations There are several historical examples that ...

  • Financial Statements: Long-Lived Assets | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements7.asp
    ... Used. Cost, The investment is carried at its historical cost; holding
    gains/losses are recognized only when the asset is sold. Only ...

  • How To Analyze Real Estate Investment Trusts

    http://www.investopedia.com/articles/04/030304.asp
    ... building at $500,000 (aka, the book value): the original historical cost of $1 million
    minus $500,000 accumulated depreciation (10 years x $50,000 per year). ...

  • Financial History: The Rise Of Modern Accounting

    http://www.investopedia.com/articles/tax/08/accounting-taxes.asp
    ... Proponents of this type of accounting argue that historical cost financial statements
    are flawed because they do not provide information on current value ...

  • Investment Valuation Ratios: Price/Book Value Ratio | Investopedia

    http://www.investopedia.com/university/ratios/investment-valuation/ratio2.asp
    ... Some analysts feel that because a company's assets are recorded at historical
    cost that its book value is of limited use. Outside ...

  • CFA Level 1 Study Guide - Financial Statements - Accounting ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-statements/accounting-qualities.asp
    ... Demand; 3.3 Price Elasticity; 3.4 Elasticity of Demand; 3.5 Elasticity of
    Supply; 3.6 Marginal Benefit and Marginal Cost; 3.7 Market ...

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