Which costs are included in the initial measurement of Property, Plant, and Equipment (PPE)?

The initial measurement of Property, Plant, and Equipment (PPE) includes not just the purchase price, but all costs that are directly attributable to bringing the asset to its intended use. This includes the purchase price itself, any directly attributable costs necessary for preparing the asset for use, and dismantling costs that may be incurred to restore the site where the asset is located.

Directly attributable costs could encompass items such as installation fees, transportation costs, and professional fees necessary for the asset's acquisition and setup. Additionally, dismantling costs, such as those associated with removing the asset at the end of its useful life, are included because they are necessary to bring the asset to its current condition and location.

In contrast, financing costs and ongoing maintenance are not included in the initial measurement of PPE. Financing costs are typically expensed in the period they are incurred, and ongoing maintenance expenditures are treated as operational costs, rather than capitalized as part of the asset's value. Therefore, the inclusion of purchase price, directly attributable costs, and dismantling costs accurately reflects the total investment made to acquire and prepare the asset for its use.