Page 20 - Finac1 Test 3 slides - 1. Property, Plant and Equipment

TEST 3 PREPARATION

Elements of cost
Elements of cost - Read IAS 16.16-18

• An entity applies IAS 2 Inventory to the costs of

obligations for dismantling, removing and restoring the

site on which an item is located that are incurred
during a particular period as a consequence of having

used the asset to produce inventories during that

period. (This implies that these costs will be capitalised
to inventory and not to the PPE item.)

• Examples of costs that are not costs of a PPE item are:

• (a) costs of opening a new facility;

• (b) costs of introducing a new product or service (including
costs of advertising and promotional activities);

• (c) costs of conducting business in a new location or with a
new class of customer (including costs of staff training); and

• (d) administration and other general overhead costs.

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