Our company moved and we are capitalizing the expenses Office Furniture, etc. We bought some artwork and plants, each totaling a few thousand. I know artwork can be capitalized, but what about the plants? I have heard some companies have capitalized trees, so I was curious if this would fall under the same category.
Thanks for your help,
Adam
Does Plant carry any resale value.... "No"
than what permits to capitalize an item of no value.... it should be expense out
Under the International Financial Reporting Standards (IFRSs), the trees are dealt with by International Accounting Standard (IAS)-41 'AGRICULTURE'.
IAS-41 includes the trees and plants in the definition of 'Biological Assets' and lays down complete guidance as to how these can be recognized, measured or derecognized.
Obviously, trees and plants are not part of Property, Plant and Equipment (fixed assets) defined in IAS-16. However, there is a complete solution for their accounting treatement as assets (biological assets) for which I recommend you to go through the IAS-41.
Regards,
According to the financial reporting framework, trees can be capitalised if they bring economic resources to the entity. This, for example, will be the case when the company is a furniture manufacturer and has its own trees. The trees in this case will bring revenue in the form of finished furniture.
One criteria may be hard to apply reliable estimate of the value of trees.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Dard</i>
<br />According to the financial reporting framework, trees can be capitalised if they bring economic resources to the entity. This, for example, will be the case when the company is a furniture manufacturer and has its own trees. The trees in this case will bring revenue in the form of finished furniture.
One criteria may be hard to apply reliable estimate of the value of trees.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I tend to disagree.
In case of business of furniture (if it is taken in such a sense; though I disagree on this as well) the trees should have to be treated as 'inventories' and not as "property, plant and equipment (fixed assets)".
Now, even if these are treated as "inventories", the relevant standard i.e. IAS-2 specifically excludes all Biological Assets from its ambit and asks to follow IAS-41 for their treatment.
In the entire set of IFRSs (the framework which we follow at Pakistan) the trees have not been categorized under any other form of assets except the "Biological Assets".
Certainly I am not referring any financial reporting framework other than IFRSs.
Regards,
Would not the furniture be the inventory? The final product is the furniture, which is to be sold. Trees are not sold directly, furniture is made from them.
I did not say the tree would be recognised as Property, Plant or equipment. I just said it CAN be recognised as an asset if the definition of asset is met.
IAS 41 paragraph 10 states "An entity should recognise a biological asset or agriculture produce only when the entity controls the asset as a result of past events, it is probable that future economic benefits will flow to the entity, and the fair value or cost of the asset can be measured reliably". This is the definition of asset provided in the framework.
adamhunter, you can not capitalise the plants if they are just for decoration.
You used the word "capitalise" which is common for property, plant and equipment items and is not used for other assets.
Trees cannot be treated as inventory as well, if it was meant by you.
For furniture manufacturer, the wood, the work in process, other supportive inventories like polish or paint or nails and the finished form furniture etc are the inventories definitely.
As explained earlier in my very first post on this thread, trees have to be accounted for as Biological Assets under IAS-41.
I guess you would be clear.
Regards,
Wow, an addition to my knowledge of the topic.
As far as I have been taught once it definitely is possible to capitalize plants if you can prove that those in particular are used for the office. It's a health issue actually so there is a certain amount of money from capitalization that can be used for plants if proven to be placed within the borders of your office rooms. I sometimes do [url="http//www.serenataplants.com"]plant deliveries[/url] for my company and we always capitalize those and we never had a problem with it. You should definitely try it out.