Can training costs, essential for the operation of a new machinery (asset), be capitalised? Either its a 'yes' or 'no', can you explain please?

No

Because IAS16 says that PPE's cost plus all the the directly attributable cost necessary to bring the PPE INTO WORKING CONDITION.

Training cost is related to using the machinery when machinery has been put into working condition hence it is an expense.

As per IAS16 an item of property, plant and equipment should initially be recorded at cost. [IAS16.15] Cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees for architects and engineers, and the estimated cost of dismantling and removing the asset and restoring the site.

Costs that do not provide future economic benefits are expensed in the period incurred. The initial training costs are not necessary to get the asset ready for use. Rather, the training costs are necessary to get the employees ready to use the asset. Thus, the training costs are immediately expensed.

Hence the answer is NO, these expenses will not be capitalized.

Hi guys,

Need help as well.

A Software package which needs specific configuration training to the users (not general training, but specific It related user specific training) - can that be classed as Capex?

No. Asset is something that have future economic benefits that is being controlled by the company. Human may be paid for their labor but cannot be controlled by the company because the person being trained may render something against wgat has been expected say for example resignation. For this matter, training costs should be expensed immediately.

Training cost can't be capitalised.According to IAS16 Property,Plant and Equipment, assets should only be recognised if owner has control over assets.Trained staff may leave employment i.e;entity has no control over human resources so training expenses must be charged to income statement for the year to which they relate.