What does 'historical cost' include when acquiring a depreciable asset?

When acquiring a depreciable asset, the concept of 'historical cost' encompasses all expenditures that are necessary to bring the asset to its usable condition. This includes not only the purchase price but also additional costs that are directly attributable to the acquisition of the asset.

In this context, the historical cost comprises the purchase price, any applicable taxes, shipping costs incurred to transport the asset, and expenses related to assembly and installation. Each of these components ensures that the asset is ready for its intended use. For example, shipping is crucial to move the asset to its location, while installation and assembly may be required to make the asset operational.

This comprehensive approach to calculating historical cost is essential for accurate financial reporting and depreciation calculations over the asset's useful life. By including all these costs, the historical cost reflects the actual investment made in the asset.