A manufacturing company was to purchase various

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Reference no: EM13379735

A manufacturing company was to purchase various capitalizable spare parts(some of which could be very expensive) for its manufacturing equipment(as a precautionary measure for future mechanical break down) what would be the proper way to handle these assets?

1) Would I segregate them on the balance sheet as non revenue producing assets, not depreciate them but instead analyze them for impairment annually and then potentially write them down annually.

2) Or would I start depreciating them immediately based on the argument that their idleness would be temporary(but who knows for how long and maybe some for years or never), they are needed for ongoing business continuity reasons(there would be a potential lead time to get new parts) and the idle assets could in fact lose value over time(even if not used) due to obsolescence and the like.a

Reference no: EM13379735

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