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New part of asset, replacement cost is capitalized. What about old part of asset that we replace, does it treat as an expense? or loss on disposal?
A replacement is not capitalized unless it improves the performance or extends the life of the existing asset
So the old part that is being replaced by a newer improved version is not separately accounted for as a disposal nor as an expense.
It remains as part of the original accounting and continues to be depreciated … I imagine! I’ve never come across that question before!
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Since the question is too long, it is in BPP kit book question (Elite Leisure) number 44. I wonder where is $25M comes from.
I’ll check when I get back from holiday – I don’t take BPP material with me … not even for weekend breaks
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