Assertion (A): Under Ind AS 16, subsequent expenditure on an item of PPE is capitalized only if it is probable that future economic benefits will flow to the entity and the cost can be measured reliably. Reason (R): Day-to-day servicing and repair costs are expensed as incurred because they do not meet the recognition criteria. Choose the correct option.
A. Both A and R are true but R is NOT the correct explanation of A
B. A is true but R is false
C. Both A and R are true and R is the correct explanation of A
D. A is false but R is true
Answer: Option C
Solution (By JKSSB Mock Tests)
Ind AS 16 requires capitalization of subsequent costs only if they meet the recognition criteria (future economic benefits and reliable measurement). Routine repairs and servicing do not add future economic benefits, so they are expensed. R correctly explains A.
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