Question

Which of the following is not a component of cost of an asset?

	A.	Refundable sales tax
	B.	Import duties
	C.	Estimate of compulsory future dismantling costs
	D.	Purchase price

Answer 1

The cost of the item of asset includes:

(a) The purchase price, which includes the import duties and any non-refundable taxes on such purchase, after deducting rebates and trade discounts

(b) Costs which are directly attributable to bringing assets to the condition and location essential for it to operate in a manner as intended by the management

(c) Initial estimate of costs of removing and dismantling an item and restoring a site where it is located.

Only Non refundable taxes are to be considered as addition to the cost of asset.

Hence, Refundable sales tax is not a component of cost of an asset (Option A)