IAS 16 property, plant and equipment pdf
IAS 16 OverviewThe objective of IAS 16 property plant and equipment (PPE) is to prescribe the accounting treatment for property, plant and equipment. The principal issue is the timing of recognition of assets, the determination of their carrying amounts, and the depreciation charges to be recognized in relation to them. The following is the IAS 16 summary Show
IAS 16 Property, Plant and EquipmentIAS 16 Recognition criteriaItems of property, plant and equipment should be recognized as assets when:
Initial MeasurementAssets recognized under IAS 16 Property, Plant and Equipment must be initially recognized at cost. 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 and estimated cost of dismantling and removing the asset and restoring the site it the payment for an item of Property, Plant and Equipment is deferred, interest at a market rate must be recognized or imputed. Elements of cost (IAS 16 directly attributable costs examples)The cost of an item of property, plant and equipment consists of:
Subsequent expenditure IAS 16 on AssetExpenditure relating to non-current assets, after their initial acquisition, should be treated as expense unless it meets the criteria for recognizing an asset. In practice, this means that expenditure is capitalized if it improves the asset (for example, by enhancing its performance or extending its useful life). Measurement Subsequent to Initial RecognitionIAS 16 Property, Plant and Equipment permits TWO accounting models:
The Revaluation ModelUnder 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. If an item is revalued, the entire class of assets to which that asset belongs should be revalued. Revalued assets are depreciated in the way as under the cost model.
Depreciation (Cost and Revaluation Models)IFRS property plant and equipment For all depreciable assets:
Depreciation should be charged to the income statement, unless it is included in the carrying amount of another asset. Depreciation begins when the asset is available for use and continues until the asset is derecognized, even if it is idle. Derecognition (Retirement and Disposal) of An AssetAn asset should be removed from the balance sheet 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 recognized in the income statement. IAS 16 PDfThe International accounting standards 16 pdf is available to download. Moreover, click here to Download IAS 16 summary pdf Which of the following is covered by IAS 16 property, plant, and equipment?IAS 16 applies to the accounting for property, plant and equipment, except where another standard requires or permits differing accounting treatments, for example: assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
What can be Capitalised under IAS 16?IAS 16 says that we can capitalize any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (IAS 16.16(b)).
What are the key features of IAS 16?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.
What are the recognition criteria for property, plant, and equipment?Recognition of Property, Plant and Equipment
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.
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