Capitalisation of traning cost for Equipment

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1 Points Joined September 2023

We are in the process of capitalising one equipment. Can we capitalise the employee traning cost for that equipment as per Ind AS 16 ?

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On 28 January 2025 at 08:09 Report
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9060 Points Joined December 2011

As per Ind AS 16, Property, Plant and Equipment (PPE), you can capitalize certain costs related to an asset, including employee training costs, but only if they meet specific criteria.

Capitalization Criteria To capitalize employee training costs, you must ensure that they are:

 1. *Directly attributable* to bringing the asset to its working condition.

 2. *Necessary* to prepare the asset for its intended use. Examples of Capitalizable Training Costs Examples of employee training costs that can be capitalized under Ind AS 16 include:

1. Training on the operation and maintenance of the equipment.

2. Costs incurred to familiarize employees with the new equipment.

Examples of Non-Capitalizable Training Costs Conversely, the following training costs are not eligible for capitalization: 

1. General training programs not specific to the equipment. 2. Training on general business operations or management. Documentation and Disclosure To capitalize employee training costs, ensure you maintain proper documentation, including:

1. A clear link between the training costs and the specific equipment.

 2. Records of the training costs incurred. Additionally, disclose the capitalized training costs in the financial statements, as per the requirements of Ind AS 16.

Please consult with your accounting advisor or auditor to ensure you meet the specific requirements and criteria for capitalizing employee training costs under Ind AS 16.

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On 28 January 2025 at 11:51


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