When can costs subsequent to acquisition of Property Plant and equipment are capitalized?

Question

When can costs subsequent to acquisition of Property Plant and equipment are capitalized?

Answer 1

Items of property, plant, and equipment should be recognised as assets when it is probable that: [IAS 16.7]

- the future economic benefits associated with the asset will flow to the enterprise; and

- 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.

As long as the criteria above are fulfilled, you can capitalize the expenditure to PPE.