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In May 2020, the Board issued Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) which prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use.
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- Objective of IAS 16
- Scope
- Recognition
- Initial MeaSureMent
- MeaSureMent SubSeQuent to Initial recognition
- The RevalUATion Model
- DePreCiATion
- ReCovErAbilIty of The Carrying Amount
- DereCogNiTion
- Disclosure
The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the recognition of assets, the determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them.
IAS 16 applies to the accounting for property, plant and equipment, except where another standard requires or permits differing accounting treatments, for example: 1. assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 2. biological assets related to agricultura...
Items of property, plant, and equipment should be recognised as assets when it is probable that: [IAS 16.7] 1. it is probable that the future economic benefits associated with the asset will flow to the entity, and 2. the cost of the asset can be measured reliably. This recognition principle is applied to all property, plant, and equipment co...
An item of property, plant and equipment should initially be recorded at cost. [IAS 16.15] Cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees f...
IAS 16 permits two accounting models: 1. Cost model.The asset is carried at cost less accumulated depreciation and impairment. [IAS 16.30] 2. Revaluation model.The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation and impairment, provided that fair value can be...
Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. [IAS 16.31] If an item is revalued, the entire class of assets to which that asset belongs should be revalued. [IAS 16.36] Revalued assets are depreci...
For all depreciable assets: The depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset's useful life [IAS 16.50]. The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, if expectations differ from previous estimates, any change is acco...
IAS 16 Property, Plant and Equipmentrequires impairment testing and, if necessary, recognition for property, plant, and equipment. An item of property, plant, or equipment shall not be carried at more than recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Any claim for c...
An asset should be removed from the statement of financial position on disposal or when it is withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal is the difference between the proceeds and the carrying amount and should be recognised in profit and loss. [IAS 16.67-71] If an entity rents...
Information about each class of property, plant and equipment For each class of property, plant, and equipment, disclose: [IAS 16.73] 1. basis for measuring carrying amount 2. depreciation method(s) used 3. useful lives or depreciation rates 4. gross carrying amount and accumulated depreciation and impairment losses 5. reconci...
Disposal of previously revalued assets When an asset is disposed of that has previously been revalued, a gain or loss on disposal is to be calculated (as above). Any remaining surplus on the revaluation surplus should be transferred to retained earnings as:
Overview. IAS 16 defines PPE as tangible items that are: held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and. expected to be used during more than one period. Initial measurement.
IAS 16 establishes principles for recognising property, plant and equipment as assets, measuring their carrying amounts, and measuring the depreciation charges and impairment losses to be recognised in relation to them.
Apr 1, 2009 · Property plant and equipment (PPE) are tangible assets that an entity holds for its own use or for rental to others, and that the entity expects to use during more than one period. PPE could be constructed by the reporting entity or purchased from other entities. Biological assets, intangible assets and investment property are not PPE.
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When is the cost of a property considered an asset?
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IAS 16 states that the cost of an item of property, plant and equipment shall be recognized as an asset if, and only if: it is probable that future economic benefits associated with the item will flow to the entity; and; the cost of the item can be measured reliably.
