TABLE OF CONTENTS Although the broad principles of accounting for non-current assets are well understood by the accounting profession, applying these principles to practical situations has resulted in complications and inconsistency. For the most part, IAS 16 Property, Plant and Equipment codifies existing good practice, but it does include specific rules which are intended to achieve improved consistency and more transparency.
IAS 16 requires property, plant and equipment to be initially recorded at cost. The cost of an item of property, plant and equipment comprises its purchase price and any other costs directly attributable to bringing the asset into a working condition for its intended use. This can consist as follows:
The purchase price, which is calculated after the deduction of any trade discounts or rebates (but not early settlement discounts), but it does include any transport and handling costs (delivery, packing and insurance), non-refundable taxes (e.g. sale taxes such as VAT, stamp duty, import duty). If the payment is deferred beyond normal credit terms, this should be taken into account either by the use of discounting or substituting a cash equivalent price.
Directly attributable costs, which are the incremental costs that would have been avoided had the assets not been acquired. For self constructed assets, this includes the labour costs of own employees. Abnormal costs such as wastage and errors are specifically excluded.
Installation...
