IAS 16 - Key component of equipment used to replace a broken one

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Lasa1
Posts: 66
Joined: 07 Oct 2020, 11:29

IAS 16 - Key component of equipment used to replace a broken one

Post by Lasa1 »

Hello,

Some machines required the use of cards to work. Without the card, the machine cannot work, it is key component of the machine.
When a card is broken, we replace the card by a new one and we repair the broken one that will be used in another machine.
Those cards meet our capital threshold and have an expected useful life greater than one year.
Shall we capitalize the cards that we purchased to have them available when needed? Intuitively I would say yes, but is not clear to me when yes and when no.

Any paragraph in the IAS16 I can refer to?

Thanks!
pub_acco
Trusted Expert
Posts: 328
Joined: 19 Mar 2020, 16:40

Re: IAS 16 - Key component of equipment used to replace a broken one

Post by pub_acco »

I'd see them as spare parts capitalized as PP&E in accordance with IAS 16.8.

Btw, are they some paper or plastic cards like credit cards or some devices like network cards? How can a card be a critical component of a machine?
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