Historic cost concept

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Harsh Modi (Querist)

19 May 2012 Historic Cost Concept says that 'whenever any asset is purchased, it should be recorded at historic cost'. Historic Cost means just acquisition price and not installation charges. Then why do we include installation charges while recording asset. Isn't it violation of Historic Cost Concept?

vishwash agarwal

vishwash agarwal (Expert)

22 May 2012 Dear Harsh
Your Query is right but friend as per

AS 10 Accounting for Fixed Assets
Components of Cost

The cost of an item of fixed asset comprisesits purchase price, including
import duties and other non-refundable taxes or levies and any directly
attributable cost of bringing the asset to its working condition foritsintended
use; any trade discounts and rebates are deducted in arriving at the purchase
price. Examples of directly attributable costs are:
(i) site preparation;
(ii) initial delivery and handling costs;
(iii) installation cost, such as special foundations for plant; and
(iv) professional fees, for example fees of architects and engineers.
The cost of a fixed asset may undergo changes subsequent to its acquisition
or construction on account of exchange fluctuations, price adjustments,
changes in duties or similar factors.

that is why installation charges include in historical cost .

Regards
VISHWASH AGARWAL
M N - 07666515328
Mail - vishwashagarwal@ymail.com

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