Self-constructed asset
IAS 16 measures its cost using the same principles as an acquired asset: include directly attributable costs necessary to bring it to the location and condition needed for intended use, and eligible borrowing and dismantling costs where applicable. Eliminate internal profits and exclude abnormal waste and costs incurred after the asset is ready for use. Depreciation begins when the asset is available for use.
Worked example
A company builds a machine using $60,000 of materials and $30,000 of directly attributable labour, with no other eligible costs. Its initial cost is $90,000; a $5,000 internal profit charged by one department is eliminated.
Common mistake
Including abnormal wasted materials or an internal profit in the cost merely because the construction was performed in-house.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |