Recyclis Atlantique: the life of a recycling line, from commissioning to disposal

Recyclis Atlantique turns used plastic bottles into pellets sold to packaging manufacturers. In year N, it buys and installs a complete regeneration line made up of a shredder, an extruder and the structure connecting them (conveyors, washers, electrical cabinets). You follow this line over three years: initial cost and dismantling (N), components and depreciation (N), fire, replacement, revision of estimates and impairment test (N+1), then sale of the extruder, year-end close and disclosures (N+2).

All figures are case data; teaching assumptions and professional judgements are flagged as such. Recyclis applies the cost model to its property, plant and equipment (case data). Case simplification: as output is sold as it is produced, depreciation is presented directly as an expense; strictly speaking, the depreciation of a production line forms part of the production cost of the inventories manufactured (IAS 16, para. 49).

Standard involved: IAS 16 Property, Plant and Equipment (initial cost). An item of property, plant and equipment that meets the recognition criteria is measured at its cost (IAS 16, paras. 7 and 15). Your task: sort the expenditure in the acquisition file between what goes into the cost of the line and what goes to profit or loss, calculate the dismantling provision to include in cost, then post the initial entry. Method reminder: cost brings together three blocks (net purchase price, directly attributable costs, discounted estimate of dismantling) and capitalisation stops when the line is in the condition necessary to operate as intended.