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+--- Thread: capitalisation of repair & mainenance (/thread-capitalisation-of-repair-mainenance)
capitalisation of repair & mainenance - noman - 09-19-2007
i wanted confirm...which of the following can be/should be capitalised..
1-any structural improvements ( new rooms etc)to a rented building
2-renovation,re-decoration of owned property
3-significant repairs and maintenace expenses of a rented property..
thanx
- Moon - 10-05-2007
AOA
I think i should refer to IFRS while answering to your questions. IAS-16 states for all-the-way new expenditure
"Items of property, plant, and equipment should be recognised as assets when it is probable that
1) the future economic benefits associated with the asset will flow to the enterprise (mnz benefit from the expenditure will last for more than a year); and
2) the cost of the asset can be measured reliably.
This recognition principle is applied to all property, plant, and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it."
Based on the above rule, structural improvements should be capitalized, renovations and significant repairs etc should be expensed out if they do not meet the recognition criteria.
I hope the above would serve your question, for any question/discussion on this, you are welcome.
Regards