[Rosicky]

Hi Mike

Thank you for replying to my question.

In regards to the question, therefore it means restoring the 8 year old vessel’s engine doesn’t provide economic benefit even though it’s a major overhaul; useful life remains or capacity to generate additional revenue hasn’t increase.

Whereas those vessels on planned maintenance every 10 years, we capitalized as the engine is being componentize, major overhaul takes place(maintenance) & enhances the life of the vessel by another 10 years.

Therefore when it comes to capitalizing subsequent repair & maintenance can I safely say it must meet one of the following –
1. It enhances the economic benefits of the tangible fixed asset in excess of the previously assessed standard of performance; incremental benefits associated with cost.
2. Where a component of the tangible fixed asset that has been treated separately for depreciation purposes and depreciated over its individual useful economic life, is replaced or restored.
3. It relates to a major inspection / overhaul restoring economic benefits consumed and reflected in depreciation

In regards to the 3rd point, does restoring economic benefit mean back to its original level/capacity ? Shouldn’t that be expensed?

And enhancement of economic benefit doesn’t have to planned to qualify for capitalization ?

Honestly I am still a bit confused of the treatment application.

[Author]

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