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Under Ind AS 16, the cost of an item of property, plant and equipment INCLUDES:
ACost of expected major repairs and maintenance over useful life
BOnly the purchase price and direct freight/installation costs
CThe estimated salvage value at end of useful life
DThe initial estimate of dismantling, removal and site-restoration costs (capitalised and a corresponding decommissioning provision recognised under Ind AS 37)
Answer & Solution
Correct answer: D. The initial estimate of dismantling, removal and site-restoration costs (capitalised and a corresponding decommissioning provision recognised under Ind AS 37)
Para 16(c) of Ind AS 16 — initial estimate of decommissioning/restoration costs is capitalised in PPE cost (and depreciated over the asset's useful life); a corresponding decommissioning provision is recognised under Ind AS 37 measured at PV of expected settlement expenditure. Major repairs are recognised at the time they occur, salvage affects depreciable amount but isn't a cost component.
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