Cessation of capitalization

 Cost recognition ceases once an item of PP& E is in the location and condition necessary for it to be capable of operating
in the manner intended by management. This will usually be the date of practical completion of the physical asset. IAS 16
therefore prohibits the recognition of relocation and reorganization costs, costs incurred during the run up to full use once
an item is ready to be used, and any initial operating losses. [IAS 16.20]. An entity is not precluded from continuing to
capitalize costs during an initial commissioning period that is necessary for running in machinery or testing equipment. By
contrast no new costs should be capitalized if the asset is fully operational but is not yet achieving its targeted profitability
because demand is still building up, for example in a new hotel that initially has high room vacancies or a partially let
investment property. In these cases, the asset is clearly in the location and condition necessary for it to be capable of
operating in the manner intended by management.