The major characteristics of property, plant, and equipment are: 1) They are acquired for use in operations and not for resale. 2) They are long-term in nature and usually depreciated. 3) They possess physical substance. Most companies use historical cost as the basis for valuing property, plant, and equipment. Historical cost measures the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. For example, companies like Kellogg Co. consider the purchase price, freight costs, sales taxes and installation costs of a productive asset as part of the asset's cost. It then allocates these costs to future periods through depreciation. Subsequent to acquisition, companies should not write up property, plant, and equip when it is above cost. The main reasons for this position ment to reflect fair value 1) Historical cost involves actual, not hypothetical, transactions and so is the most reliable. 2) Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold