what is a historical cost 
a historical cost is a measure of value that s used in accounting the value of an asset on the balance sheet is recorded at its original cost when it s acquired by the company the historical cost method is used for fixed assets in the united states under generally accepted accounting principles gaap investopedia joules garciaunderstanding historical coststhe historical cost principle is a basic accounting principle under u s gaap most assets are to be recorded on the balance sheet at their historical cost under the historical cost principle even if they ve significantly increased in value over time 1not all assets are held at historical cost marketable securities are recorded on the balance sheet at their fair market value and impaired intangible assets are written down from historical cost to their fair market value valuing assets at historical cost prevents overstating an asset s value when asset appreciation may be the result of volatile market conditions the asset would still be recorded on the balance sheet at 100 000 if a company s main headquarters including the land and building was purchased for 100 000 in 1925 and its current expected market value is 20 million asset depreciation must be recorded to account for wear and tear on long lived assets in accordance with accounting conservatism fixed assets such as buildings and machinery will have depreciation recorded regularly over the asset s useful life annual depreciation is accumulated over time and recorded below an asset s historical cost on the balance sheet 2the subtraction of accumulated depreciation from the historical cost results in a lower net asset value ensuring that there s no overstatement of an asset s true value asset impairment vs historical costan impairment may occur to certain assets including intangibles such as goodwill independent of asset depreciation from physical wear and tear over long periods of use an asset s fair market value has dropped below what s originally listed on the balance sheet with asset impairment an asset impairment charge is a typical restructuring cost as companies reevaluate the value of certain assets and make business changes goodwill must be tested and reviewed at least annually for any impairment the asset is considered impaired if it s worth less than carrying value on the books no change is made to historical cost if it s risen in value the devaluation of an asset based on present market conditions would be a more conservative accounting practice than keeping the historical cost intact 