Costs excluded from the cost of an item

Learning objectives

• Identify the costs excluded from the cost of an item of property, plant and equipment.L1
• Identify, in a list of expenditures, those to be recognised as an expense.L2

Normative references

• IAS 16 §19Examples of excluded costs: opening a new facility, introducing a new product or service (advertising), conducting business in a new location or with a new class of customer (staff training), administration and other general overhead costs.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• A restaurant chain opens a new site. Which of the following expenditures must be recognised as expenses rather than included in the cost of the site's property, plant and equipment? (Select all that apply.)L2
• While installing a new bottling line, an entity incurs 30,000 of pay for the engineers who assemble and set up the line, and 8,000 of salaries for the head-office accounting staff who processed the project invoices. Justify the treatment of each of these two amounts.L3