Hello all.
A quick question: IAS 16 refers that costs of open a new facility are not attributable direct costs and therefore can not be capitalized.
However, do not provide examples of this opening costs.
For example, for open a new facility, if a company have to purchase some equipment or construct a building, these costs can be capitalized...
They are refering costs of prospecting or desing a new facility?
Thanks in advance.
Costs of open a new facility
Re: Costs of open a new facility
a piece of equipment or a building are separate tangible assets, so they won't be a part of a cost of a 'facility'
It's true that the wording could be clearer, but what is meant here IMO are start-up and admin costs that are more linked to costs of running a business and should be expensed even though they may be directly linked to a specific 'facility'
It's true that the wording could be clearer, but what is meant here IMO are start-up and admin costs that are more linked to costs of running a business and should be expensed even though they may be directly linked to a specific 'facility'
Re: Costs of open a new facility
So, for example, if you have a (internal) team already in the new facility managing the construction / renewal and implementing the plans for the facility construction / machines implementation, you consider this as attributable costs or as these "costs of open a facility"?
Because i do now see these costs not as costs of runnig a business but as costs linked to this construction, in other words, if there was no construction, these costs may not even exist.
Because i do now see these costs not as costs of runnig a business but as costs linked to this construction, in other words, if there was no construction, these costs may not even exist.
Re: Costs of open a new facility
I think you can safely add those to the cost of the asset as these are costs of construction
watch out for admin & marketing expenses directly linked to that facility, but not contributing to assets per se
watch out for admin & marketing expenses directly linked to that facility, but not contributing to assets per se
Re: Costs of open a new facility
Yes, mtk and admin is clear that need to be excluded.
The other ones are more tricky.
Thanks!!
The other ones are more tricky.
Thanks!!
Re: Costs of open a new facility
well, I could easily imagine a CFO focused on EBITDA claiming that expenditures on business and strategy of the new 'facility' should be capitalised in its cost
Re: Costs of open a new facility
when you put 'open a new facility' I was thinking of the cost of hiring a brass band and fireworks. Guess those would be expensed as not strictly necessary.
Re: Costs of open a new facility
Fireworks may be considered to be a vital stress test to the fire safety procedures before opening
Re: Costs of open a new facility
equally the brass band to test the soundproofing. good point.