IAS 16 - Property, Plant & Equipment (MEASUREMENT)

What did the asset cost?

What was the purchase price, including import duties, taxes, trade discounts, rebates or other types of refunds included at the time it was aquired?

Were any costs incurred in order to get the asset to its current condition, place or location when making it operable?

Were any costs incurred as necessary to dismantle any part of the asset or remove any part which was not necessary, restored, or obliged to have taken away?

Direct Costs Include the Following:

- employee benefits accrued to the entity directly attributed to any necessary labour in association with construction or acquisition of the item of Property, Plant or Equipment*.

- site preparation costs

- delivery and handling costs at inception

- installation and assembly costs

- costs to test for functionality, after deducting net proceeds from sale proceeds associated with bringing that asset to its present location and condition (eg. costs of test samples)

- professional fees

Regarding any part of the property, plant or equipment which was removed, see IAS 2 - Inventories.

Some accountants get confused with the idea of costs needed to bring the asset to its current condition or location. Economic transactions which are not included are costs to open a new facility, costs to introduce a new product or service, costs to conduct business in a new location or start business with a new customer and lastly for sake of providing examples, costs to administer the work such as overhead costs which are general in nature.

Major inspections at regular intervals are capitalized. Remaining costs from last capitalized inspection are de-recognized.