I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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3.5 Subsequent expenditure 

Subsequent expenditure is added to the carrying amount of the asset, but only when it is probable that 

future economic benefits, in excess of the originally assessed standard of performance of the existing 

asset, will flow to the enterprise (IAS 16, para. IN6). All other subsequent expenditure is simply 

recognised as an expense in the period in which it is incurred (IAS 16, para. 12). 

The important point here is whether any subsequent expenditure on an asset improves the condition of 

the asset beyond the previous performance. The following are examples of such improvements. 

(a) 

Modification of an item of plant to extend its useful life, including increased capacity 

(b) 

Upgrade of machine parts to improve the quality of output 

(c) 

Adoption of a new production process leading to large reductions in operating costs 

Normal repairs and maintenance on property, plant and equipment items merely maintain or restore 

value; they do not improve or increase it, so such costs are recognised as an expense when incurred.