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following is an extract from a bpp question on Non-current assets
“flightline took the opportunity to upgrade its cabin facilities at the cost of 4.5m. this did not increase the useful life of the cabin fittings but the imporved facilities enabled flightline to substantially increase the air fares on this aircraft”
bpp is adding this amount to the CV of the asset.
my question: it did not add to the useful life. why is it being added to the cv of the component?
is it because the amount is substantial?
thanks in advance
No, it’s nothing to do with the magnitude of the upgrade. It’s because the asset now has substantially increased earning capacity. It’s as simple as that! Has the further expenditure improved the earning capacity of the asset? Yes? Then capitalise
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