Costs directly attributable to bringing an asset to working condition are capitalised, while repairs, maintenance and general administrative costs are expensed. Over-capitalisation inflates profit, making it a risk area in audits.
Source: TMS 16, TMS 38, TMS 23
Related terms
Property, plant and equipmentPhysical assets used in the production of goods and services, for rental or for administrative purposes, and expected to be used for more than one period.Intangible assetsIdentifiable non-monetary assets without physical substance; software, licences, brands and patents are examples.Borrowing costs (TMS 23)The standard requiring interest and other borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period to get ready for use or sale) to be included in its cost.Accounting estimatesThe determination by management judgement of amounts that cannot be measured precisely, such as provisions, useful lives, expected credit losses and fair values.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Accrual basis of accountingThe principle of recording transactions as income, expenses, assets and liabilities in the period in which they occur, rather than when cash is received or paid.
Last updated: November 8, 2026 · This definition is for general information only.