Page 101 - F3 -FA Integrated Workbook STUDENT 2018-19

Non-current assets: acquisition and depreciation

Tangible non-current assets

3.1 Acquisition of a tangible non-current asset

According to IAS 16, Property, Plant and Equipment, the cost of a non-current asset
is any amount incurred to acquire the asset and bring it into working condition. Any
other costs incurred should be written-off as expenses.

Example 1

Cost of a tangible non-current asset

Barney purchased a new item of plant which had a list price of $100,000, but
which was subject to a 10% trade discount. Additionally, Barney paid $2,500
delivery costs and a further $1,500 for installation. Barney also paid $9,000
for a three-year maintenance agreement. Barney paid the total amount due
immediately.

Required:

What amount should be capitalised by Barney as the cost of the item of
plant?

Solution

$
Cost of plant $100,000 × 90% 90,000
Delivery costs 2,500

Installation costs 1,500
–––––

94,000
–––––

95