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A wind energy company requested guidance on the accounting and tax treatment of machinery renewal through the replacement of parts by the manufacturer. The DGT ruled that the accounting treatment must involve capitalising the new component and derecognising the previous one.
Companies performing major component replacements must ensure they correctly adjust the carrying amount of the asset by adding the new cost and removing the book value of the replaced part to comply with accounting standards.
The tax team reviews your specific situation.
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