IAS 16 requires that Property, Plant, and Equipment (PPE) should initially be measured at cost. The cost of PPE includes the following components:

• Purchase Price: The purchase price is included net of any trade discounts or rebates.
• Directly Attributable Costs: Costs directly attributable to bringing the asset to its location and condition necessary for it to operate as intended by management. This includes costs such as site preparation, delivery, installation, and professional fees.
• Estimated Costs of Dismantling and Removing the Asset: These are the costs required to dismantle and remove the asset and restore the site, which are considered at the time of initial recognition.

Explanation:
Under IAS 16, PPE is initially recognized at cost, which encompasses not just the purchase price but also all the costs necessary to get the asset ready for its intended use, including dismantling and restoration costs. This ensures the true capital expenditure on PPE is reflected.

b)

• Subsequent Expenditure: IAS 16 requires that subsequent expenditure on an item of PPE should generally be expensed in the profit or loss when incurred, unless it enhances the future economic benefits of the asset beyond the originally assessed standard of performance. In such cases, the subsequent expenditure can be capitalized and added to the carrying amount of the asset.
• Subsequent Measurement: After initial recognition, an entity must choose between two models for subsequent measurement of PPE:
  1. Cost Model: Under the cost model, PPE is carried at its cost less any accumulated depreciation and accumulated impairment losses.
  2. Revaluation Model: Under the revaluation model, PPE is carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated depreciation and impairment losses.

Explanation:
IAS 16 allows capitalizing subsequent expenditure only if it increases the future benefits from the asset. For subsequent measurement, entities can choose between the cost model and the revaluation model, depending on the company’s policy.