Costs of Conducting Business in a New Location

An entity has moved its machines and factory equipment to a new location. How should the entity record the cost of conducting business in a new location?

Keywords: Mazars, Thailand, Accounting, TAS 16, TAS 38, TFRS for NPAEs

2 January 2014

TAS 16 “Property, Plant and Equipment” says that the cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:

  • it is probable that future economic benefits associated with the item will flow to the entity; and
  • the cost of the item can be measured reliably.

In addition, TAS 16 gives examples of costs that are not costs of an item of property, plant and equipment, including costs of conducting business in a new location or with a new class of customer (including costs of staff training).

In line with TAS 38 “Intangible Assets” and TFRS for NPAEs, the cost of conducting business in a new location is not permitted to be recognised as an asset.

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