Historical cost and monetary measurement

Two further named concepts confirmed in past papers, deciding HOW an asset's value is recorded in the first place.

What each concept means

MONETARY MEASUREMENT: only items that can be reliably expressed in DOLLAR terms are recorded in the financial statements — this is why staff skill or brand reputation, real as they are, do not appear as assets.
HISTORICAL COST: an asset is recorded at its ORIGINAL purchase price (plus costs to get it ready for use), NOT at its current market value or what it would cost to replace today.
Together, these concepts explain why an imported asset is recorded at the actual NZ dollar amount paid (converted at the exchange rate on the transaction date) plus delivery/installation — not at today's replacement cost.

Worked example Applying historical cost and monetary measurement to an imported asset A 3D projector is imported from Germany for NZ$45,000, plus NZ$4,000 delivery and installation. Explain how it is reported using monetary measurement and historical cost. MONETARY MEASUREMENT: the projector is recorded at its NZ dollar value, since only amounts expressible in money terms can be recognised in the financial statements. HISTORICAL COST: the recorded amount is the actual price PAID at the time of purchase (NZ$45,000) plus the cost to get it ready for use (NZ$4,000 delivery/installation) — a total of NZ$49,000 — regardless of what the projector might be worth or cost to replace today. ✓ The total NZ$49,000 combines the purchase price with the readiness-for-use cost, following the SAME capital-expenditure logic used for the food truck's installation cost elsewhere in this standard. ✕

Recording an asset at its current value instead of its historical cost

A common error assumes an asset should be updated to reflect its current market value or replacement cost. Under historical cost, the ORIGINAL amount paid (less accumulated depreciation) remains on the books — this is exactly why "carrying amount may not reflect market value" is one of the standard limitations to name when asked.

Concept	What it controls
Monetary measurement	WHETHER an item can be recorded at all — only reliably dollar-measurable items qualify
Historical cost	WHAT AMOUNT is recorded — the original price paid plus readiness-for-use costs, not current value

Practice for this standard covers the whole topic — flashcards and quiz.