Q&A – Subsequent Costs of PPE

How should an entity record replacement costs when it has not separately recorded the cost s of replaced part? In normal business operations it may be necessary to replace significant components or parts of larger assets.

Keywords: Mazars, Thailand, Accounting, TAS. 16

19 July 2013

If the replacement costs meet the accepted accounting recognition principles (not being costs of the day-to-day servicing or maintenance of the item), then TAS.16 requires an entity to recognise the carrying amount of an item of property, plant and equipment as the replacement cost for part of the item. In conjunction, it also requires simultaneous de-recognition of the carrying amount of the replaced part, regardless of whether the replaced part had been depreciated separately. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.