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Currently I was reviewing accounts and discovered that the head of finance had capitalized and office expense of 200,000 as part of cost for office fitting and furniture.
I was of opinion that this cost should be experienced directly to the p&l.
He is a senior colleague with a lot more certifications and experience.
Is his treatment of this cost wrong and if he is what points do I use to point it out to him.
Please keep in mind that the office space is rented
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You should refer to IAS 16:
Items of property, plant, and equipment should be recognised as assets when it is probable that: [IAS 16.7]
it is probable that the future economic benefits associated with the asset will flow to the entity, and the cost of the asset can be measured reliably.
IAS 16 recognises that parts of some items of property, plant, and equipment may require replacement at regular intervals. The carrying amount of an item of property, plant, and equipment will include the cost of replacing the part of such an item when that cost is incurred if the recognition criteria (future benefits and measurement reliability) are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of IAS 16.67-72. [IAS 16.13]
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