Property, Plant & Equipment

Property, Plant & Equipment

1. Definition

   • tangible items that are
     • held for use - production / supply of goods & services, rental to others / administrative purposes
       • Mode of usage
     • expected to be used during more than one period
       • term of holding by an entity

2. Applicable Std & Scope

   • IAS 16
     • except
       • another accounting std requires diff. accounting treatment
       • doesn't apply to some items of PPe within the scope of other accounting stds
         • Assets held for sale (IFRS 5)
         • Biological assets (IAS 41)
         • Exploration & evaluation assets (IFRS 6)

3. Recognition

   • Cost = Asset, only if
     • probable - future economic benefits - flow to the entity
     • cost of the item - measured reliably
   • After PPE has been recognised as asset - may incur additional cost on the PPE
     • maintenance costs
     • give rise to future economic benefits
   • Day-to-day servicing (repair & maintenance) = expenses
     • major spare parts, servicing equipments, replacement & inspection of PPE = asset (if recognition criteria is met)

4. Measurement

   • At recognition
     • cost
       • Purchase price
       • Directly attributable Cost
       • Dismantling Cost
     • carrying amount of an item - ceases when
       • yet to be brought into use / just launched / operated less than full capacity
       • Initial operating losses
       • costs of relocating part / all of an entity's operations
     • acquired in exchange
       • fair value
         • except
           • lack of commercial substances
           • fair value is not reliably measured
   • After recognition
     • Cost Model
     • Revaluation Model
       • Surplus
       • Deficit

5. Depreciation

   • systematic allocation - depreciable amount - an asset over its useful life
     • shall be recognised in the P&L unless included in the carrying amt of another asset
   • calculate
     • commencement / cessation of depn.
     • depreciable amt. (incl. residual value) of asset
     • useful life of asset
     • depn. method

6. Derecognition

   • on disposal
     • IAS 18
       • sales of goods
     • IAS 17
       • sale & leaseback
   • no future economic benefit - expected - its use / disposal
   • gain / loss - P&L
     • gain ≠ revenue

7. Disclosure

   • measurement bases used for determining - gross carrying amt.
   • depn. methods used
   • useful lives / depn. rates used
   • gross carrying amt. & acc. depn. (plus acc. impairment losses) - beginning & end of the period