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- This topic has 4 replies, 2 voices, and was last updated 3 years ago by
abokor.
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- February 17, 2021 at 3:07 pm #610760
Hello sir, hope u are well.
sir, I would highly appreciate if u give a little explanation about Major overhaul and Repair, for every say, 5 years. And how to treat in the SFP and SPL.
thanks in advance
February 19, 2021 at 8:27 pm #611011Hi,
If we know we need to overhaul the asset every 5 years, then we would depreciate what we expect the cost to be be over 5 years. So, if we bought an asset for 100m and it was going to cost us 5m in 5 years time to overhaul it (say) then we would depreciate teh 5m over the 5 years, and depreciate the rest of the asset’s cost of 95 (100 – 5) over the life of the asset, which is likely to be longer, say 20 years.
When we come to carry out the overhaul in 5 years, the new cost is then capitalised as part of the asset and then depreciated over the period to the next overhaul.
Thanks
February 19, 2021 at 8:34 pm #611014understood. Thank u so much
February 19, 2021 at 8:59 pm #611024I’m surprised we don’t see more of it appear in the exam. If it were to appear then it would be more likely to be in section A or B.
Thanks
February 20, 2021 at 8:03 pm #611124I’ll kill it. If it pups up in the exam. Thanks for sharing the Exam hints.
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