CFA CFA Level 1 Depreciation of Long Lived assets

FRA

Depreciation of Long Lived assets

  • This topic has 1 reply, 2 voices, and was last updated Jul-21 by Zee Tan.
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      When we are considering historic cost of a long lived assets, the cost include installation, transportation and purchase cost. May I know why include installation and transpotation when calculating depreciation? As i think installation and transportation cost are expenses, should not be counting into the assets value for deprecitation.

    • Zee Tan
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      The definition of an asset’s cost is all costs that are necessary to get an asset in place and ready for use.

      So installation and transportation costs are part of the asset’s cost and used in depreciation.

      It also makes sense when you think about it – what is charged as installation, transportation and actual product costs can be quite arbitrary and vary depending on supplier.

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