IAS 16 is the accounting standards that deal with property, plant and equipment. There are numbers items elements said in paragraph 16 of this standard that allow to capitalize as assets. Those items included:
- Its purchase price of fixed assets
- Import duties of assets and non-refundable purchase taxes. Discount and rebate should not take into account.
- Entity might incur costs to bringing the asset to the location and condition and these costs should also be capitalized.
The entity might when into the obligation that it has to dismantling the build and restore the site into the original condition.
If this is the case, the standard require entity to estimate the costs that would be happened and then capitalize those costs as the costs of fixed assets and then depreciate them based in its useful life.
And the estimate cost might be changed from time to time. This case, the discounting should be applying to make sure that the estimate costs is at the present value. And the different is charged into statement of profit and loss.