Conceptual Framework for Financial Reporting

Measurement bases
Historical cost
Historical cost measures provide monetary information about assets, liabilities
and related income and expenses, using information derived, at least in part,
from the price of the transaction or other event that gave rise to them. Unlike
current value, historical cost does not reflect changes in values, except to the
extent that those changes relate to impairment of an asset or a liability
becoming onerous (see paragraphs 6.7(c) and 6.8(b)).
The historical cost of an asset when it is acquired or created is the value of the
costs incurred in acquiring or creating the asset, comprising the consideration
paid to acquire or create the asset plus transaction costs. The historical cost of
a liability when it is incurred or taken on is the value of the consideration
received to incur or take on the liability minus transaction costs.
When an asset is acquired or created, or a liability is incurred or taken on, as a
result of an event that is not a transaction on market terms (see
paragraph 6.80), it may not be possible to identify a cost, or the cost may not
provide relevant information about the asset or liability. In some such cases, a
current value of the asset or liability is used as a deemed cost on initial
recognition and that deemed cost is then used as a starting point for
subsequent measurement at historical cost.
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6.2
6.3
6.4
6.5
6.6
Conceptual Framework
A62
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The historical cost of an asset is updated over time to depict, if applicable: 
(a)
the consumption of part or all of the economic resource that
constitutes the asset (depreciation or amortisation);
(b)
payments received that extinguish part or all of the asset;
(c)
the effect of events that cause part or all of the historical cost of the
asset to be no longer recoverable (impairment); and
(d)
accrual of interest to reflect any financing component of the asset.
The historical cost of a liability is updated over time to depict, if applicable: 
(a)
fulfilment of part or all of the liability, for example, by making
payments that extinguish part or all of the liability or by satisfying an
obligation to deliver goods;
(b)
the effect of events that increase the value of the obligation to transfer
the economic resources needed to fulfil the liability to such an extent
that the liability becomes onerous. A liability is onerous if the
historical cost is no longer sufficient to depict the obligation to fulfil
the liability; and
(c)
accrual of interest to reflect any financing component of the liability.
One way to apply a historical cost measurement basis to financial assets and
financial liabilities is to measure them at amortised cost. The amortised cost
of a financial asset or financial liability reflects estimates of future cash flows,
discounted at a rate determined at initial recognition. For variable rate
instruments, the discount rate is updated to reflect changes in the variable
rate. The amortised cost of a financial asset or financial liability is updated
over time to depict subsequent changes, such as the accrual of interest, the
impairment of a financial asset and receipts or payments.