On 1 October 2017, Delta completed the construction of a new power generating facility which started in the beginning of the year. The total construction cost was RO 20 million. The facility was...

On 1 October 2017, Delta completed the construction of a new power generating facility which started in the beginning of the year. The total construction cost was RO 20 million. The facility was capable of being used from 1 October 2017 but Delta did not bring the facility into use until 31 December 2017. The estimated useful life of the facility at 1 October 2017 was 40 years. The details of such cost calculation is as follows:

RO in ‘000

• Machinery parts used for construction 5,000


• Other material cost 2,000


• Labour cost 6,000


• Site preparation cost 1,000


• Consultancy fees for installation of equipment 220


• Relocation of staff to new factory 110


• General overheads 330


• Dismantling cost at the end of useful life 640


• Interest on loan to partly finance the construction of the facility 1,000


• Other direct cost relevant to the construction 3,700

20,000

Other information:

• Other direct cost includes a cost of RO 960,000 paid from the construction date till 31st December 2017. It also includes a maintenance contract for such facility of RO 200,000 for 5 years.


• Delta took a loan of RO 10,000,000 to fund the construction of the power plant on 1st Jan 2017. The interest is paid @ of 10% per annum.

You

are required to confirm if the cost of such facility was calculated in accordance to IAS 16. If not then calculate the cost at which such facility will be recorded?