What costs are included in fixed assets?

01What costs are included in fixed assets?

When acquiring a factory, except for the cost of land and building, we have to incur many other costs, such as:-

i)                 dismantling the items left by the previous owner,

ii)                renovation cost,

iii)               legal fees for the loan agreement, and

iv) Other administration costs.

Can we capitalize all of the cost as “assets”?

Dismantling and renovation costs as i & ii above, can be capitalised,

Legal fees and other administrative costs as iii & iv above need to be expense off.

Generally, we should capitalize all of the costs as long as there are incurred directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management.

Expensed off cost

However, there are some costs specifically mentioned in the standards which we should NOT capitalized:

-        Cost of opening a new facility

-        Cost of advertising and promotional activities

-        Cost of staff training

-        Administration and other general overhead costs

-        Borrowing costs

Source

Section 17 Property, plant and equipment -

https://www.cas.net.my/wp-content/uploads/2013/02/MPERS-Framework.pdf

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