Capitalisation of traning cost for Equipment

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.

No. Training costs are specifically excluded:

• Ind AS 16 para 19(c) lists costs that are not costs of an item of PPE, including costs of staff training. Training employees to operate new equipment is expensed as incurred, even if it is necessary for the equipment to be used.

• What can be capitalised (para 16–17): purchase price, import duties and non-refundable taxes, site preparation, delivery and handling, installation and assembly, professional fees, and costs of testing whether the asset functions properly (net of sale proceeds of test output). Also the initial estimate of dismantling and restoration.

• Capitalisation stops when the asset is in the location and condition necessary to operate as intended (para 20). Operating losses after that are expensed.

• AS 10 (non-Ind AS) has the same exclusion. Income-tax follows (Sec 43(1) "actual cost"). Training is a revenue expense, deductible under Sec 37(1).