Page 21 - 2018 Finac1 Test 3 Class Slides - 1. Property, Plant And Equipment
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TEST 3 PREPARATION
Elements of cost - Read IAS 16.16-18
Elements of cost
• 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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