Acquisition Value

One measure of an asset's acquisition value is its purchase price. If you use something other than cash to pay for the asset, then the fair market value of the noncash payment or consideration determines the acquisition value. A noncash consideration often takes the form of an account payable or another obligation to pay. When you cannot determine the value of the consideration paid, the fair market value of the asset determines its acquisition value.

With few exceptions, an asset's acquisition value should also include necessary costs incurred to place the asset in service. You then capitalize these costs, not expense them. Costs that you can capitalize include the invoice price plus incidental costs (insurance during transit, freight, duties, title search, registration fees, and installation costs). Exceptions to this rule include interest expenses associated with deferred payments and real estate taxes paid in the acquisition of property.

The accounting method used to determine acquisition value may not always apply for tax purposes. To accommodate different tax and accounting needs, you can enter a different acquisition value for each depreciation book maintained.