# Property, Plant and Equipment — Elements of Cost
Before auditing PPE additions, an auditor must know what can and cannot be capitalised. This determines whether expenditure increases the asset or hits the P&L.
## What Forms Part of Cost?
The cost of an item of PPE comprises:
1. Purchase Price — including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
2. Directly Attributable Costs — costs to bring the asset to its location and condition necessary for it to be capable of operating as management intends.
3. Decommissioning Costs — initial estimate of dismantling, removing the item and restoring the site.
## Examples of Directly Attributable Costs (CAPITALISE)
- Employee benefit costs arising directly from construction or acquisition of the PPE.
- Site preparation costs.
- Initial delivery and handling costs.
- Installation and assembly costs.
- Costs of testing the asset (net of proceeds from selling items produced during testing).
- Professional fees (e.g., architect, legal).
## Examples of Costs NOT Part of PPE Cost (EXPENSE)
- Costs of opening a new facility or business (e.g., inauguration costs).
- Costs of introducing a new product or service (including advertising and promotional activities).
- Costs of conducting business in a new location or with a new class of customer (including staff training).
- Administration and other general overhead costs.
## Auditor's Approach to Repair Expenses
Expenses must be analysed and properly classified. Routine repairs on assets (regular maintenance) are revenue expenditure and must be charged off to P&L — they cannot be capitalised. Only repairs that enhance future economic benefits beyond the original assessment (e.g., major overhaul extending useful life) qualify for capitalisation.