• Register
Search Questions / Answers

Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Although you need not be a member to ask questions or provide answers, we invite you to register an account and be a member of our community for mutual help. You can register with your email or with facebook login in few seconds

Get AccountantAnswer App

Should any major parts of an asset be capitalized?


A major parts of an asset got damaged. Another new parts was replaced. But the production output remained same as before. Is it mendetory to capitalized or optional?  The cost of the parts is significant. E.g. the asset's cost CU 10 million & new parts' cost CU 1.5 million. If it is considered as Inventory (spare parts) how much valid it is? Please provide the reference of IAS-16 with paragraph.

asked Nov 23 in IAS 16 - Property, Plant and Equipment by Mk.shaon Level 1 Member (1,100 points)

1 Answer

0 votes
Capitalizing something does not necessarily imply it is a depreciable asset. Spare parts could be used for repairs and maintenance or to extend the lives of fixed assets. Under the matching principle, I believe once the part is placed in service, it should be either expensed if deemed for repairs and maintenance or depreciated if deemed to extend the asset’s original life or enhance its value.
answered Nov 24 by umarhussainia Level 5 Member (11,320 points)


...