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“IAS 16 says that the following costs should never be capitalised:
-costs of opening a new facility, introducing a new product (including advertising and promotional costs) and conducting business in a new location or with a new class of customer (including training costs)
-costs incurred in the initial operating period (such as initial operating losses and any further costs incurred before a machine is used at its full capacity)”
Sir i don’t understand why new facility costs and conducting business in a new location or with new class of customer will not be recognised?
Also as far as second point in concerned, why won’t the initial losses come under directly attributable costs incurred in bring the asset to its present condition and location, and hence be capitalised?
I’m not sure how this relates to an exam question. If you need interpretation of standards, you will need to use of the one paid services provided by an accounting firm.
For what it’s worth, you cannot capitalise training, promotion or losses. If you do it will be marked wrong. 🙂
Keep it simple in the real exam.
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