Page 164 - F1 Integrated Workbook STUDENT 2018

Chapter 10

2.3 Initial measurement of subsequent expenditure

In accordance with IAS 16 Property, Plant and Equipment, subsequent expenditure
should be capitalised when:

 the expenditure improves the future economic benefits that the asset will
generate

 it replaces a component of an asset and the carrying amount of the component
replaced is derecognised, e.g. overhaul of a furnace or a roof (where both are
separately identified as assets)

 it is the cost of a major inspection for faults and the carrying amount of the
previous inspection is derecognised

The costs of day-to-day servicing should be recognised in the statement of profit or
loss as incurred.

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