In accounting terminology, Historic Cost (HC) is the actual purchase price plus incidental costs incurred in making the fixed asset ready for use / commercial production. Any cost incurred after the asset is ready for use / commercial production should not be capitalized.

Computation of HC for fixed assets.

Land:Purchase price, surveyor's fees, attorney's fees, costs on leveling and grading, and registration charges.

Building:Purchase price, attorney's fees, registration charges, and costs incurred in respect of major improvements / alterations / betterments. However, when building is self-constructed, HC will be computed as follows: All direct costs (Material + Labour + Expenses) and an appropriate share of overheads (fixed, and variable).

Plant and Machinery:Purchase price (net), freight, loading & unloading, installation charges, commissioning (expenses on trial run and experimental production).

Furniture & Fixtures: Purchase price (net), installation charges.

Vehicles:Purchase price, registration charges, cost incurred on accessories.

Special Cases

1. When an asset has been received in exchange for another asset: HC is recorded as the fair market value of the asset given up or the asset acquired whichever is more evident.
2. When an asset has been received in consideration of issue of shares / debentures: HC is recorded at the fair market value of the asset acquired.