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are all of these costs not capitalised in measuring property, plant and equipment: Staff training, selling, rectification, maintenance/start up, general administrative, abnormal losses, early settlement discount? since PPE is held by a business for administrative purpose, does that mean that administrative overheads should be capitalised or expensed? I know that apportioned administrative overheads are not capitalised.
Are you asking whether these various costs should be included or whether they are correctly excluded?
“staff training – no. Costs of staff training do not qualify under the definition of an asset
selling – ??? How do you capitalise selling costs? Do you mean ‘the anticipated costs of selling’ – what a silly idea!
rectification – rectifying what? This is classes as ‘repairs and renewals’ and is expensed as incurred
maintenance/start up – again, maintenance costs are normally classed as repairs and renewals and expensed as incurred
start up costs – if you mean ‘installation costs’ … see below
general administrative – no. Administrative costs are expensed as incurred
abnormal losses – losses of what? The abnormally lost production from individual machines? No!
early settlement discount – no. This is a benefit of paying early and is classed as income, not as a deduction from the asset”So all those costs that you ask about are excluded from capitalisation
Here’s what the IAS classes as includable within the initial cost of PPE:
“Cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees for architects and engineers, and the estimated cost of dismantling and removing the asset and restoring the site”
OK?
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