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Capitalization without ownership of the asset?


Can the road be capitalised although the company doesn't own it?
The relocation of the road will enable the company access the resource. Will this meet the criteria of probable future economic benefit flow to the entity?

asked Oct 30 in General IFRS Discussion by CT

3 Answers

0 votes
Legal ownership is not essential to capitalize an asset as per IAS 16 as well as conceptual framework of IFRS.

The only requirement is it is probable that:
· The future economic benefits associated with the asset will flow to the entity; and
· The cost of the asset can be reliably measured.

In your case, it appears you can capitalize the road development cost, if it is the road you use.
answered Oct 30 by Mysio Level 5 Member (22,620 points)
My understanding is no future economic benefits willl flow on from the construction of the road, economic benefits will flow in moving the road as access to more coal will become available. Does that meet the first criteria you mentioned?
Also according to IASB that "an asset is a resource controlled by the entity as a resultbof past events and from which future economic benefits are expected to flow to entity." IFRIC says "An entity that controls an asset can generally deal with that asset as it pleases. For example, the entity can exchange that asset for other sssets, employ it to produce goods or services, change a price for others to use it, use it to settle liabilities, hold it, or distribute it to owners". It does not appear our company has the control over the road...
0 votes
Also, I believe the same can be capitalized using the guidance provided for enabling assets
answered Oct 30 by Vishal Sharma Level 1 Member (1,360 points)
0 votes
Yes it can be capitalized.
answered 6 days ago by anuca2008 Level 1 Member (1,750 points)


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