COMM 353 Lecture Notes - Lecture 8: Capitalization Rate, Profit Margin, Historical Cost
Document Summary
Initial recognition and measurement: what should an enterprise capitalize. The cost of an item of ppe shall be recognized as an asset (capitalized) if, and only if: It is probable that future economic benefits associated with the item will flow to the entity. The cost of the item can be measured reliably. Enterprise can capitalize all costs required to acquire or to construct the asset and to prepare it for its intended use; examples: When companies build their own ppe there are potential difficulties deciding whether an activity is part of the construction and to which asset it belongs. An entity shall capitalize borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset as part of the cost of that asset. Directly attributable: those borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made.
