Depreciation On a Major Repair

Depreciation On a Major Repair

Didn't find your answer?

Hello

We have recently carried out a major repair to one of our main fixed assets. It was about £15k so not coppers

I was wondering if i can depreciate this as without the repair the asset was only fit for the skip and considering its £250k that wouldn't be that good.

My knowledge is that i can depreciate this as it wasn't a wear and tear part of the asset

Also if i can depreciate it which accounting standard would this fall under just so i have some backup to my proposal.

Thank you in advance

Chris

Replies (3)

Please login or register to join the discussion.

avatar
By jasongibson
06th Mar 2013 11:52

IAS 16 Property, Plant & Equipment

Hi Chris,

It makes sense to depreciate for several reasons:

 

1) The useful life of the the asset has increased because of the repairs.
2) The repairs provide an economic benefit for several years, not just the accounting period in which the expense was incurred.

 

It certainly doesn't make sense to expense this to the P&L as the accounts would not provide a true and fair view of transactions within the period.

 

Jason

Thanks (1)
By Democratus
06th Mar 2013 12:04

Don't call it repair- is it refurbishment?

.

Thanks (1)
By George Attazder
06th Mar 2013 14:22

Eh?

Well is it a repair or isn't it?

If it's a genuine repair, then for tax purposes you are entitled to tax relief on it IF you treat it as an expense.  The starting point for taxable profits is profits computed under GAAP.

I can't see why you would want to capitalise it unless you have too, although it might then qualify for AIA.

I suspect it's more likely that FRS 15 (or even the FRSSE) will apply to you. You want to look at paragraphs 34 to 41. It says largely the same thing as paragraphs 12 to 14 of IAS 16 in any event.

Thanks (0)