ACCA Financial Reporting (F7) Practice Exam 2026 – Complete Prep Guide

The Cost Model measures non-current assets using Historical Cost. This means that when a company acquires a non-current asset, it records it at the purchase price, which represents the cost incurred to acquire the asset and prepare it for its intended use. This cost includes all expenses that are directly attributable to bringing the asset to its current condition and location in which it will be used.

In applying the Cost Model, the asset will be subsequently measured at this historical cost less any accumulated depreciation and any accumulated impairment losses. This approach centers on the idea that historical cost provides objective and verifiable information, as it reflects a past transaction that has already occurred, rather than relying on estimates or subjective assessments.

Using Historical Cost contributes to consistency and comparability in financial statements since the values of assets do not fluctuate based on market conditions, unlike Fair Value measurements, which may vary over time. Therefore, under the Cost Model, the focus remains on the original transaction price rather than current market conditions or future expectations.