Capitalizing means charging a cost as part of the purchase cost of an asset. There are some expenses that are required by accounting standards to be capitalized in the cost of an asset. As per IAS-23 borrowing costs, the interest cost is capitalized into the cost of a qualifying asset. A qualifying asset for this purpose is an asset that takes more than 12 months to construct or complete.
Capitalizing a cost is also required in fixed assets that have major parts all with different useful lives, for example, an airplane engine has a different useful life and its body has a different useful life. When making repairs it has to bear in mind that if the addition or maintenance is going to enhance the performance of the airplane significantly then the cost should be capitalized instead of expensing it out.
Indicate with the appropriate letter the nature of each adjustment described below
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