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CMA Final · Corporate Financial Reporting · Property, Plant and Equipment (Ind AS 16)

Tapti Foods Ltd purchased a machine. Which item is most appropriately treated as part of the machine's cost in line with Ind AS 16 principles of directly attributable cost?

Import duty and non-refundable purchase taxes, net of trade discounts, form part of the machine's cost. General head-office overheads, initial operating losses after the asset is ready for use, and relocation costs after installation are not capitalised.

  1. AImport duty and non-refundable purchase taxes, net of trade discountsCorrect
  2. BGeneral administration overheads of the head office
  3. CInitial operating losses incurred after the machine is ready for use
  4. DCosts of relocating the machine after it is installed and operating

Explanation

Purchase price includes import duties and non-refundable purchase taxes after deducting trade discounts and rebates. General overheads, operating losses after readiness, and later relocation costs are not part of cost.

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