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Can I capitalize an asset without depreciation?


We have purchased some machines but they need some additional accessories before they can be used for the intended purpose. Until we purchase such accessories, can we capitalize the machines without a depreciation charge?

asked May 23, 2014 in IAS 16 - Property, Plant and Equipment by anonymous

1 Answer

0 votes
Yes you can.
You can have your machines capitalized without depreciation because paragraph 16.55 of IAS 16 states that depreciation of an asset begins when it is available for use as intended by the management. Until the accessories are purchased, the machines need not be depreciated. However on the balance sheet those machines should be shown as capital work in progress until such accessories are purchased.
answered May 24, 2014 by anonymous
Yes you can, IAS16.55 States that depreciation of an asset begins when an asset is available for use, your machine is not! then you just only need to capitalize it.

Depreciation is a method of matching principle in the accrual basis of accounting which simply says match the expenses incurred against the income generated, therefore it will not make sense if you were to depreciate an asset that is not in use because no expenses were incurred in operating the machine and also the machine did not generate any income for your company.


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