Rules Governing Accounting of Non-current Tangible Assets Under IAS Essay

Rules Governing Accounting of Non-current Tangible Assets Under IAS - Essay ExampleBesides the constitute of plus IAS 16 has concentrated on the issue of cost of bringing the summation to location and the asset make available under present conditions of its operations as per management plans. The important thing is that by prescribing this reign IAS 16 has put a limit to capitalization of expenses once the asset starts operating as per intention of management. Another important feature is that employee benefits accruing during construction or development of assets as per intended use overly need to be capitalized. Further, cost of testing any item of the asset for ensuring its functioning is too ask to be capitalized. For example testing fee paid to a laboratory for testing the quality of a part of the machinery is capital cost during initial perception. But when such(prenominal) cost is incurred after the operation of machinery has started, such costs would be treated as r evenue expenditure. IAS 16 states that cost of dismantling and removing an asset and damages it where it is located should be capitalized. But the important feature of IAS 16 is that cost that is incurred subsequent to initial recognition on replacing or making an addition to such asset or its part should also be capitalized if such costs meet the recognized principles of accrual economic benefits to the entity and reliable measurement of such subsequent cost. This is clearly the departure from earlier practices of capitalization of assets.When an asset is acquired in exchange of other, the rule is to mensurate the fair value of both asset and if fair values of the asset given up end be assessed reliably, then that would be the cost of the exchanged asset. But if the fair value of the new asset acquired is more evident, then fair value of such asset would be used as the cost of the asset. However, there is another possibility of the use of carrying value of asset given up as the