IAS 16Chapter 4Lesson 1
After acquisition: day-to-day servicing, replacement of parts, major inspections
Step 1 of 9Learning objectives
Go deeper+2 calculations · +1 journal entry
What should be done with expenditure on an item already in the balance sheet? Day-to-day servicing is expensed. Replacing a part is capitalised if the criteria are met, and the carrying amount of the replaced part is removed. A periodic major inspection follows the same logic: it becomes a component, and what remains of the previous inspection is derecognised.
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Learning objectives
- Distinguish day-to-day servicing, which is expensed, from subsequent expenditure that can be capitalised.
- Account for the replacement of a part: capitalise the new cost and derecognise the carrying amount of the replaced part.
- Recognise a major inspection as a component and derecognise what remains of the previous inspection.
- Calculate the loss on derecognition and record the corresponding entries.