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equipment. It also includes payment for acquisition of intangible assets like goodwill,
patents and trademarks. A good example of the self-constructed asset is construction of
an office building or a showroom using own resources. Furthermore, all costs incurred in
bringing a non-current asset to a point it is ready for use are capitalised; they are considered
to be part of the cost of an asset. Examples of such expenses, in addition to the price
paid, include transport/inward cost, fees paid to a lawyer in relation to asset acquisition
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and asset installation costs. In the books of accounts, the measurement of non-current
asset is done initially at cost and subsequently, using cost or revaluation model. Cost is
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the consideration paid to acquire an asset at the time of its acquisition or construction.
Where applicable, it is the amount attributed to that asset when initially recognised in
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accordance with the specific requirements of the standards for the determination of the
cost of the asset. The following example provides alternative costing approaches for
recognition of an asset in the books of accounts:

(a) Cost as the purchase price to acquire the asset; a firm pays TZS 500,000 to buy a
table, or
(b) The value of anything else given in exchange for the asset; a firm gives out a
computer with the fair value of TZS 1,500,000 in order to get a table, or
(c) The valuation method given by other standards for something given in exchange
for the asset; a firm gives out a share options worth TZS 900,000 to get a table in
return.
Since tangible non-current assets are normally used for more than one year, an entity
may incur subsequent cost in the life span of an asset apart from the initial acquisition
cost. In this case, the costs of an asset are usually categorised into two types, the initial
costs and subsequent costs. Initial costs are those which are incurred during acquisition
of an asset for the first time while subsequent costs are those incurred to maintain the
asset or to renovate or upgrade it.

Activity 7.1
The Chief Auditing General (CAG) report of 2023 highlighted challenges in the
measurement of Property, Plant and Equipment in Air Tanzania, with a specific focus
on its subsidiary, Air Tanzania. Operating as a regional carrier, Air Tanzania serves
domestic and international routes.
Required: In response to the CAG report, identify and describe five (5) classes
of Property, Plant and Equipment present in an airline company like Air Tanzania.
Recommend the appropriate initial and subsequent measurement model for each
identified class of Property, Plant and Equipment, providing justification for each
recommended model.

Student’s Book Form Five
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