![]() To some extent, you can also capitalize quality controls and testing (if these activities are inevitable in order to put an asset into use). You can capitalize the employee benefits provided to site workers, in-house architects and surveyors or production supervisors.The answer is no admin, no general functions, no research activities, no marketing & advertising, no training employees. Which employee categories arise from the construction or the acquisition of the asset?.These doubts arise especially when your company constructs a big asset, such as a plant or a mine.Ĭost of employee benefits As written above, you can capitalize only those employee benefits that arise from the construction or the acquisition of the asset. Yet in practice, there are many items that require our careful judgment and we are not sure whether to include them in the cost of an asset or not. On top of that, IAS 16 clarifies in the paragraph 20 that costs of operation below full capacity, initial operating losses and relocating or reorganizing entity’s operations are not to be capitalized. Administration and other general overhead costs.Costs of conducting a business in a new location or with a new class of customer, and.Costs of introducing a new product or service.Costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition, andĪs opposed to that, the paragraph 19 of IAS 16 lists examples of costs that are not costs of an item of PPE and therefore, cannot be capitalized:.Costs of employee benefits ( IAS 19 Employee benefits) arising directly from the construction or the acquisition of the item of PPE,. ![]() In the paragraph 17 of IAS 16 there are the examples of what expenses are considered to be directly attributable and therefore, can be capitalized (or included in the cost of an asset): If you take action today and subscribe to the IFRS Kit, you’ll get it at discount! Click here to check it out! Have you already checked out the IFRS Kit ? It’s a full IFRS learning package with more than 40 hours of private video tutorials, more than 140 IFRS case studies solved in Excel, more than 180 pages of handouts and many bonuses included. ![]()
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