Components of Cost

Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value. The cost of an item of fixed asset comprises

• Its purchase price, including import duties and other non-refundable taxes or levies
• Any directly attributable cost of bringing the asset to its working condition for its intended use;
• The initial estimate of the costs of dismantling and removing the asset and restoring the site on which it is located, the obligation for which the enterprise incurred either when the item was acquired, or as a consequence of having used the asset during a particular period for purposes other than to produce inventories during that period.

Any trade discounts and rebates are deducted in arriving at the purchase price. The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments and changes in duties or similar factors.