The document discusses how to calculate the cost of a non-current asset for depreciation purposes. It states that the cost includes the purchase price plus any additional expenditures required to get the asset ready for use that will benefit the asset over its lifetime, such as delivery and installation fees. It provides examples of a vehicle and computer purchase and analyzes which additional costs should be included in the total asset cost.

1. 13.2
THE “COST” OF A NON-
CURRENT ASSET

2. © Michael Allison. Author’s permission required for external use.
 In order to calculate depreciation, it is important to fully understand the
meaning of the “cost” of a non-current asset
 Accounting reporting guidelines state that the cost of an Asset will include:
13.2 THE “COST” OF A NON-CURRENT ASSET
The purchase (invoice) price of the asset – or its agreed value
+
• Any costs required to get it in a capacity and location to earn revenue
• Which will provide an economic benefit for the life of the asset. E.g.
• Delivery fees
• Installation costs
• Taxes

3. © Michael Allison. Author’s permission required for external use.
• Any costs required to get it in a capacity and location to earn revenue
• Which will provide an economic benefit for the life of the asset. E.g.
• Delivery fees
• Installation costs
• Taxes
13.2 THE “COST” OF A NON-CURRENT ASSET
The purchase (invoice) price of the asset – or its agreed value
Other PartyBusiness
2015 2016 2017
Will last a lifetime:
• Delivery fees
• Installation costs
• Taxes
Will not last a lifetime:
• Insurance
• Registration
• Service agreement
Will not last a lifetime:
• Insurance
• Registration
• Service agreement
Will not last a lifetime:
• Insurance
• Registration
• Service agreement

4. © Michael Allison. Author’s permission required for external use.
 Example 1: a firm purchased a new vehicle:
Purchase price: $20,000 (plus
$2,000 GST)
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration:
$800 per year
Total cost = $21,500
Purchase price:
$20,000
Stamp duty: $1,000
Dealer fees and
charges: $500
Purchase price: $20,000 (plus
$2,000 GST)
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration:
$800 per year
13.2 THE “COST” OF A NON-CURRENT ASSET

5. © Michael Allison. Author’s permission required for external use.
Stamp duty: $1,000
Dealer fees and charges: $500
Insurance and registration: $800 per year
• Required to get the vehicle in a
capacity and location to earn
revenue
• Will provide an economic benefit for
the life of the asset – they are only
paid once at the start of the asset’s
life
• Is it required to get the vehicle in a
capacity and location to earn
revenue?
• And won’t last for the life of the asset
– will need to be repaid every year
13.2 THE “COST” OF A NON-CURRENT ASSET

6. © Michael Allison. Author’s permission required for external use.
 Example 2: a firm purchased a new computer:
Purchase price: $10,000 (plus
$1,000 GST)
Installation fee: $2,000
Service contract: $200 per year
Total cost = $12,000
Purchase price: $10,000 (plus
$2,000 GST)
Installation fee: $2,000
Purchase price: $10,000 (plus
$1,000 GST)
Installation fee: $2,000
Service contract: $200 per year
13.2 THE “COST” OF A NON-CURRENT ASSET

7. © Michael Allison. Author’s permission required for external use.
Installation fee: $2,000 Service contract: $200 per year
• Required to get the vehicle in a
capacity and location to earn
revenue
• Will provide an economic benefit for
the life of the asset – only paid once
at the start of the asset’s life
• Not required to get the vehicle in a
capacity and location to earn
revenue
• And won’t last for the life of the asset
– will need to be repaid every year
13.2 THE “COST” OF A NON-CURRENT ASSET

8. © Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ3 X
SQ4 X