Business Glossary

acquisition of an asset less discounts plus all normal incidental costs necessary to bring the asset into existing use and location. Note that the list price is often higher than the acquisition price. Examples of incidental costs are taxes, transportation, installation, and insurance; also called cost principle. If an asset is acquired for the incurrence of a long-term liability rather than cash payment, it is recorded at the present value of the future payments. An asset acquired in exchange for stock is recorded at the fair market value of the stock issued. If the fair value of the stock is not known, then the fair value of the asset received is used.

accounting principle requiring that all financial statement items be based on original cost or acquisition cost. The dollar is assumed to be stable for the period involved.

accounting principle requiring assets to be based on original cost or a substituted basis ; a stepped-up basis to market value is provided to the heirs upon death of the former owner.