## Initial Measurement — Cost of PPE under AS 10
On initial recognition, PPE is measured at cost. Cost includes all expenditure directly attributable to bringing the asset to its present location and condition for its intended use.
---
### Includable Cost Components
| Component | Notes |
|---|---|
| Purchase price | Exclude refundable taxes (GST where ITC is available) |
| Site preparation costs | To prepare site before installation |
| Technician / supervisor salary | Only for the installation/construction period |
| Transportation / freight | Cost to bring asset to site |
| Professional fees (architect, consultant) | If directly attributable |
| Stamp duty & registration (land) | Part of acquisition cost |
| Net demolishing expense | Gross demolishing exp − Scrap income (excl. GST on scrap) |
| Depreciation on asset used for installation | e.g., bulldozer depreciation added to building cost |
| Testing expenses | Prior to asset being ready for use |
| Spare parts consumed during installation |
---
### Excluded from Cost → Charged to P&L
| Item | Reason |
|---|---|
| GST (when ITC is available) | Recoverable — not a cost |
| Abnormal losses | Incurred after asset was ready for use |
| Inter-company profit on services | Unrealised profit — must be eliminated |
| Costs after asset is ready for use | Post-capitalisation → revenue expense |
---
### GST Treatment
- ITC available → Exclude GST from cost
- ITC not available → Include GST in cost
Back-calculation from GST-inclusive price:
```
Cost (excl. GST) = GST-inclusive amount × 100 ÷ (100 + GST rate%)
```
---
### Net Demolishing Expense
When old structures are demolished to make way for new PPE:
```
Net Demolishing Expense = Gross demolishing expenditure − Scrap proceeds (excl. GST)
```
GST collected on scrap sale is payable to the government — it is NOT income; exclude it.
---
### Depreciation on Asset Used for Construction
If a PPE (e.g., bulldozer) is used to construct another PPE (e.g., building):
→ Depreciation on the bulldozer during the construction period is capitalised into the building's cost.
> Both are PPE; the bulldozer's depreciation is a direct cost of building the new asset.