PPE

Question 1

PPE – Betterments (ASPE)

Answer 1

• A “betterment” enhances service potential (increase in physical output or service capacity, associated operating costs are lowered, useful life is extended, or quality of output is improved)
• If the expenditure can be classified as a betterment  capitalize asset
• If the expenditure cannot be classified as a betterment  expense as repair and maintenance

Reference: ASPE 3061.14

Question 2

PPE – Costs (ASPE)

Answer 2

• PPE costs represent the amount of consideration given up to acquire, construct, develop, or better a PPE and comprise of all costs directly attributable to the acquisition, construction, development or betterment, including installing it at the location and in the condition necessary for its intended use
• PPE costs include direct construction or development costs (such as materials and labour) and overhead / carrying costs directly attributable to the construction or development activity
• The cost of each item of PPE acquired as part of a basket purchase (i.e. when a group of assets is acquired for a single amount) is determined by allocating the price paid for the basket to each item on the basis of its relative fair value at the time of acquisition

Reference: ASPE 3061.03, .06, .08