How do you measure and recognize value of PPE?

PPE that qualifies for recognition as an asset shall be measured at cost. The cost of PPE acquired through a non-exchange transaction, shall be measured at its fair value as at the date of acquisition. The cost of an item of PPE comprises

  • Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates
  • Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management
  • Initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

Cost not qualified for PPE recognition:

  1. Costs of opening a new facility;
  2. Costs of introducing a new product or service (including costs of advertising and promotional activities);
  3. Costs of conducting business in a new location or with a new class of customers (including costs of staff training); and
  4. Administration and other general overhead costs.

(Reference: Section 5 Chapter 10, GAM for NGAs, Vol. I)

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