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Project Cost Componentisation

Under the Australian accounting standard AASB 116 Property, Plant and Equipment (or international equivalents) an entity is required to identify and depreciate the various components of an asset separately if they have differing asset lives and are significant relative to the total cost of the item. This relates to both property and plant & equipment assets.

In our experience the majority of companies do not properly allocate project costs to the individual component assets. This is particularly true in regards large projects where often expenditure is capitalised in large junks based upon parent assets or individual supply contracts rather than the actual depreciable fixed assets. This is typically due to a lack of planning for or expertise in the discipline of cost accounting, or both.

Getting the project cost componentisation right from the outset has numerous benefits, including;
  • Compliance with AASB116;
  • An accurate asset register allowing optimum asset management;
  • Optimum depreciation in line with component asset lives

PP&E are experienced in assisting companies plan and implement processes to ensure that capital expenditure is capitalised in the most appropriate manner resulting in an asset register that accurately reflects the fixed assets purchased, easy on-going asset management and optimum asset depreciation.

Simply contact us to begin the process to improved asset management.

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