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We have a Generator that is now fully depreciated. However, a major repair (overhaul) has been carried out on the generator and the life of the Gen will likely extend. However, we cannot reliably determine how long this will be. How should we treat the repair cost?
in IAS 16 - Property, Plant and Equipment by

1 Answer

0 votes
The costs of a major inspection or overhaul should be expensed as incurred except if:
a) the components which are being replaced or restored have already been previously identified and depreciated so as to reflect the consumption of the economic benefits provided by them;
b) it is probable that future economic benefits will flow from the asset being inspected or overhauled; and
c) the cost of the major inspection or overhaul can be measured reliably.
Therefore, if these three criteria are met, the expenditures should be capitalised as a component of the asset
by Level 4 Member (9.8k points)