The cost of the asset includes purchase price and also expenses directly attributable to bringing the asset to working condition.
Can penalty charged by the vendor and legal fee for loan agreement be considered as expenses directly related to getting the asset ready to use?
Please explain to me.
Thank you.
Ask the Tutor ACCA FR
!AS 16 Property, Plant and Equipment
Legal fee for arranging a loan cannot be included as part of the cost.
Why would the vendor be charging a penalty? I think, unless you can persuade me otherwise with some outlandish story as to why a vendor should be charging a penalty, the answer is essentially "No, it's not capitalisable as part of the cost of the asset"
Thank you for your explanation.
the vendor charged penalty to buyer due to buyer late payment of the unpaid balance.
Thank you.
Then that's clearly a finance charge and should NOT be capitalised!
Thank you.
You're welcome
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