Capitalisation of plant and machinery
This query is : Resolved
30 January 2017
Dear Sir/Madam,
I m working in manufacturing company. We have constructed warehouse adjacent to our factory.
We have also purchases cranes for the warehouse. We have not yet capitalised warehouse building due to non receipt of construction completion certificate.
I wanted to know, can we capitalise Cranes, which we fitted in the warehouse ? We are using the cranes for machine movements.
Please advice about the capitalisation, can we capitalise plant & machinery in the books of accounts without capitalising Building ?
Best regards,
Manisha
I m working in manufacturing company. We have constructed warehouse adjacent to our factory.
We have also purchases cranes for the warehouse. We have not yet capitalised warehouse building due to non receipt of construction completion certificate.
I wanted to know, can we capitalise Cranes, which we fitted in the warehouse ? We are using the cranes for machine movements.
Please advice about the capitalisation, can we capitalise plant & machinery in the books of accounts without capitalising Building ?
Best regards,
Manisha
31 January 2017
According to IAS 16 Property, plant and equipment ( Recognition para:7)
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the entity; and
(b) the cost of the item can be measured reliably.
Its mentioned the cranes are already working which means the business is already consuming economic benefits associated with asset. The first criteria is met. I assume you already have the invoices related to purchase, freight, fitting expenses etc. for the cranes, if that's true the second criteria is also met and you could capitalise the asset.
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the entity; and
(b) the cost of the item can be measured reliably.
Its mentioned the cranes are already working which means the business is already consuming economic benefits associated with asset. The first criteria is met. I assume you already have the invoices related to purchase, freight, fitting expenses etc. for the cranes, if that's true the second criteria is also met and you could capitalise the asset.
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