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As per IAS 16 when an asset has to undergo a major overhaul, a company may estimate it based on cost as if it had been purchased at the time of purchase.
So when I have a ‘planned’ Major Replacement occurring every x years , I de-recognize the replaced part at WDV and capitalize the new part.
But is there a separate treatment for ‘unplanned’ major replacements? and if so why does the treatment differ in its logic?
I would have thought that the accounting treatment for an unplanned replacement would be identical to a planned replacement.
Any difference between WDV and proceeds would of course go to P&L.