Ind as 16
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 June 2017
Dear Sir,
Whether stand by equipment which is ready to use but not in use can be capitalized under Ind AS 16 or not.
Whether stand by equipment which is ready to use but not in use can be capitalized under Ind AS 16 or not.
Aswath Raman
(Expert)
24 June 2017
Hi Anonymous!
You see, paragraph 8 of Ind AS 16 says that
"Spare parts and servicing equipment are usually carried as inventory and recognised in profit or loss as consumed. However, major spare parts, stand-by equipment and servicing equipment qualify as property, plant and equipment when an entity expects to use them during more than one period."
This would mean that if it is a stand-by equipment, that is kept as a back-up can be capitalised. The function of a back up asset is itself to be in use when the time arises/emergency comes. Though the direct economic benefit does not arise from the stand by equipment, it is made available to safeguard the continuous flow of benefits from the production activities.
Hope you are clarified.
You see, paragraph 8 of Ind AS 16 says that
"Spare parts and servicing equipment are usually carried as inventory and recognised in profit or loss as consumed. However, major spare parts, stand-by equipment and servicing equipment qualify as property, plant and equipment when an entity expects to use them during more than one period."
This would mean that if it is a stand-by equipment, that is kept as a back-up can be capitalised. The function of a back up asset is itself to be in use when the time arises/emergency comes. Though the direct economic benefit does not arise from the stand by equipment, it is made available to safeguard the continuous flow of benefits from the production activities.
Hope you are clarified.
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