Under GAAP, which basis is typically used to record assets?

• A. Replacement cost
• B. Current market value
• C. Historical cost
• D. Net realizable value

Answer: (C)

Under GAAP, assets are recorded at historical cost—the amount paid to acquire the asset plus the costs to bring it to usable condition. This approach emphasizes objectivity and verifiability, since the figure comes from actual transactions rather than fluctuating market values. After recording, the asset is depreciated or amortized to allocate cost over its useful life, with potential impairment if its recoverable amount falls below cost. Other bases like replacement cost or current market value aren’t used to set the asset’s recorded amount for most assets, and net realizable value is mainly a consideration for inventories under the lower of cost and NRV rule. So, historical cost is the typical basis for recording assets.