IAS 16: Recognition of new part - recognition criteria met?
Posted: 16 Nov 2021, 11:07
Hello all,
I have the problem of determining whether recognition criteria for assets (IAS 16.7) are met in a certain case. It is as follows:
We have a ship, the engine of which was replaced by a newer, much different engine. My question is whether the new engine can be recognized in the sense of IAS 16.70, which is based on the general recognition criteria in IAS 16.7. The replaced engine has a certain price so the cost can be measured reliably. I was just wondering to what extend economic benefits can flow to the company. The engine on a stand-alone basis cannot produce any economic benefits (considering that my definition of economic benefits as some form of cash flows is correct). While it can generate economic benefits together with the ship, my question is then to what extent can those economic benefits then be attributed to the engine and not the ship. I feel like I am missing something obvious or did not understand something correctly...
Thanks in advance for my taking your time to read my question. Much appreciated!
I have the problem of determining whether recognition criteria for assets (IAS 16.7) are met in a certain case. It is as follows:
We have a ship, the engine of which was replaced by a newer, much different engine. My question is whether the new engine can be recognized in the sense of IAS 16.70, which is based on the general recognition criteria in IAS 16.7. The replaced engine has a certain price so the cost can be measured reliably. I was just wondering to what extend economic benefits can flow to the company. The engine on a stand-alone basis cannot produce any economic benefits (considering that my definition of economic benefits as some form of cash flows is correct). While it can generate economic benefits together with the ship, my question is then to what extent can those economic benefits then be attributed to the engine and not the ship. I feel like I am missing something obvious or did not understand something correctly...
Thanks in advance for my taking your time to read my question. Much appreciated!