Ind as 16

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 June 2017 Dear Sir,

Whether stand by equipment which is ready to use but not in use can be capitalized under Ind AS 16 or not.

Aswath Raman

Aswath Raman (Expert)
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24 June 2017 Hi Anonymous!

You see, paragraph 8 of Ind AS 16 says that

"Spare parts and servicing equipment are usually carried as inventory and recognised in profit or loss as consumed. However, major spare parts, stand-by equipment and servicing equipment qualify as property, plant and equipment when an entity expects to use them during more than one period."

This would mean that if it is a stand-by equipment, that is kept as a back-up can be capitalised. The function of a back up asset is itself to be in use when the time arises/emergency comes. Though the direct economic benefit does not arise from the stand by equipment, it is made available to safeguard the continuous flow of benefits from the production activities.

Hope you are clarified.

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