IAS 16 prescribes the accounting treatment for property, plant and equipment. Key issues include the initial recognition of cost, the determination of their carrying amounts, and their related depreciation and impairment charges.
Property, plant and equipment: tangible assets that are held by an entity for use in the production or supply of goods or services, for rental to others, for administrative purposes and are expected to be used during more than one period.
Depreciation: the systematic allocation of the depreciable amount of an asset over its useful life.
Whether acquired or self-constructed, property, plant etc. should initially be recorded at cost. Only those costs that are directly attributable to bringing an asset into working condition for its intended use are permitted to be capitalised. Capitalisation of costs is also only permitted for the period in which activities are in progress (see IAS 23 Borrowing Costs).
Capitalisation of interest is permitted, but the policy must be applied consistently and all finance costs directly attributable to the construction of a tangible fixed asset should be capitalised, provided that they do not exceed the total finance costs incurred during the period.
The amount recognised should not exceed an asset's recoverable amount.
Subsequent expenditure should normally be expensed (maintenance), but may be capitalised if:
a component of an asset has been treated as a separate asset and is now replaced or...
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