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Glossary

What is acquisition cost?

Acquisition cost is the total cost a company records for an asset such as equipment, after discounts, incentives, closing costs and other spending, before sales tax.

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What it includes

Acquisition cost, also called cost of acquisition, is more than the invoice value. It includes everything needed to buy the asset and make it ready for use, less discounts and incentives received:

  • Purchase price, net of discounts
  • Delivery and installation
  • Legal, closing and transaction fees
  • Testing and setup

Other meanings

The term also describes the cost of taking over another company or business unit, and in marketing, the cost of winning a new customer. In each case the idea is the same: the full cost of getting something, not just the headline price.

Why it matters in procurement

Recording the full acquisition cost gives an accurate asset value on the books and a fair comparison between offers. A lower price with high delivery and setup costs may cost more overall. Contracts decide many of these costs, so Contractflow keeps price, delivery and installation terms on record, and Invoiceflow checks invoices against them.

Example

A company buys a machine at a list price, receives a discount, then pays for delivery, installation and testing. The acquisition cost recorded on the books is the discounted price plus those costs.

Keep reading

Direct cost calculation Direct cost is the cost traced wholly to making a specific product or service. The basic formula adds direct materials, direct labor and other direct expenses.Read more Direct purchase A direct purchase is buying goods or services straight from the supplier without intermediaries, often the materials and components needed for production.Read more Procurement analytics Procurement analytics is gathering, classifying and analyzing purchasing data from many sources to produce insights that improve sourcing, suppliers and spend.Read more

Frequently asked questions (FAQ)

Common questions

Is sales tax part of acquisition cost?

It depends on the accounting rules and whether the tax can be recovered. A common definition treats acquisition cost as the total before sales tax, so check your own accounting policy. Read about calculating direct cost.

What is the difference between acquisition cost and purchase price?

Purchase price is what the supplier charges. Acquisition cost adds delivery, installation, fees and setup, and subtracts discounts, to give the full cost of getting the asset ready to use. See Invoiceflow.

Why compare offers on acquisition cost?

Because the cheapest price may come with higher delivery, setup or fees. Comparing the full cost shows which offer is better value. Ask each bidder to price the full scope. Read about procurement analytics.

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  • 1 A 30 minute walkthrough Built around your team, whether that is procurement, legal, IT or finance.
  • 2 Your contracts, not ours Bring a few sample agreements and watch Aavenir AI extract and review them.
  • 3 ServiceNow or standalone We show the deployment that fits the systems you already run.

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