Design of infrastructure

The managers plan for the accommodation buildings $($the safari lodge$)$ to blend in with their setting and to have minimal impact on the environment. They therefore prefer to use local materials and building techniques, including thatch$-$grass roofing harvested from Freelands, for the lodge and staff accommodation buildings. In April $20$X$0$ the plans for the lodge are finalised. They include the construction of a reception area, restaurant, lounge, swimming pool and an office from which to administer the lodge and safari operations. The plans also include a home for the Director, twenty smaller free$-$standing homes for the staff and eighteen movable, luxury aluminium$-$framed canvas safari tents for guests. When complete, the main lodge building will comprise the external structure $($expected economic life $60$ years$),$ ducted air$-$conditioning $(30$ years$),$ grass roof $(20$ years$),$ fixtures and fittings $(15$ years$),$ hard furniture $(15$ years$)$ and soft furnishings $(5$ years$).$ However, to maintain the upmarket image of the lodge, management expect to replace the grass roof, fixtures and fittings, hard furniture and soft furnishings at intervals of $10,5,3$ and $2$ years respectively.

Management do not intend to replace the external structure or the ducted air$-$conditioning before the end of its economic life. Although the grass roof and the fittings will not have reached the end of their expected economic lives at the time of their expected replacement, removing these assets is expected to damage them to a degree that will render them worthless. Management intends to use the natural stone swimming pool for its entire $60-$year economic life. The external structure of the residential buildings $($homes$)$ has an expected economic life of $60$ years, the grass roof $(20$ years$),$ furniture $(15$ years$)$ and soft furnishings $(5$ years$).$ Management intends to replace only those items at the end of their economic lives, at which point they will be worthless. The costs of disposal are expected to be insignificant.

Each safari tent has an aluminium frame $($expected economic life $30$ years$),$ a canvas covering $(10$ years$),$ fixtures and fittings $(8$ years$),$ furniture $(6$ years$)$ and soft furnishings $(2$ years$).$ The lower economic life of the assets when compared with those in the lodge is mainly attributable to the greater exposure to the elements $($for example, sunlight, wind and dust$)$ in the canvas tents. The safari tents are fully transportable and can be removed to another location if required. Wahyuni Resort expects to replace its safari tents every $15$ years. Although the fair value of the safari tents will probably be significant at the end of their economic lives, Wahyuni Resort$$s $$community support policy$$ is to donate the used tents to a charity that

supports health care and education in nearby rural communities. Wahyuni Resort aims to foster good relations with nearby communities from which its employees come.

Lodge construction

On $1$ May $20$X$0,$ the architect billed Wahyuni$$s Safari AFZ$2,000,0002$ for design work performed from February to April $20$X$0.$ Her time was allocated as follows: $90$ per cent on the lodge building, $10$ per cent on the staff housing. On $2$ May $20$X$0,$ a diesel$-$powered electricity generator was purchased for $$100,000$ and installed at the lodge at a further cost of AFZ$20,000.$ The generator is the only source of electricity at the remote lodge site and there are no plans to extend the national electricity grid to

the area in the foreseeable future.

The twenty staff houses and the manager$$s house are built between May and December $20$X$0.$ In $20$X$0$ Wahyuni Resort is billed the following

amounts in respect of the construction of all of the houses:

$($a$)$ building material: AFZ$30,000,000$ and $$1,000,000$;

$($b$)$ building contractors: AFZ$20,000,000$;

$($c$)$ building equipment: AFZ$10,000$ and $$20,000$;

$($d$)$ casual labour to cut, bundle and bind thatch$-$grass: AFZ$900,000$; and

$($e$)$ electrician fees and fittings: AFZ$600,000.$

The main lodge building is constructed between January $20$X$1$ and June $20$X$2$ by an independent construction firm in accordance with a $5,000,000$ fixed$-$price contract. Wahyuni Resort rents the staff housing to the independent construction contractors to house their employees while the main lodge is constructed. The total rent charged is AFZ$4,000,000.$

What judgements and estimates are made to measure the cost of the property, plant and equipment $($PPE$)$staff housing, lodge, tent$$at initial recognition?