A method of accounting that has historical cost (HC) as a measurement base for assets and liabilities. At initial recognition, items, transactions, and events are recorded at cost (historical cost), i.e., the original nominal monetary value, which is not updated for changes in the items’ values over time, year to year.

The Historical cost accounting (HCA), also known as historical cost method/ basis, requires that assets and liabilities be measured and reported at the original acquisition price at the time of the transaction or event. Later on, the reported value remains unadjusted for any changes in the prevailing market prices. For example, the book value of an asset is based on the price that was originally paid at initial recognition.