(Summary) Ind AS 16
Property, Plant & Equipment (PPE)
Is to prescribe the accounting treatment for PPE.
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.
Applied in the accounting for PPE.
Non-applicability: Ind AS 105, Ind AS 41, Ind AS 106.
- Property, plant and equipment
- Carrying amount
- Recoverable amount
- Useful life
Property, plant and equipment:
Tangible items that are:
- Held for use in the production or supply of goods or services, for rental to others, or for administrative purposes;
- Expected to be used during more than one period.
Items of PPE should be recognised as assets when:
- It is probable that the future economic benefits associated with the asset will flow to the entity, and
- The cost of the asset can be measured reliably.
An item of property, plant and equipment should initially be recorded at cost. Cost includes all costs necessary to bring the asset to working condition for its intended use.
Ind AS 16 permits two accounting models:
- Cost model: The asset is carried at cost less accumulated depreciation and impairment.
- Revaluation model: The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent accumulated depreciation and impairment.
If an item is revalued, the entire class of assets to which that asset belongs should be revalued.
If assets carrying amount is increased, the increase is to be recognised in OCI and accumulated in equity under the heading of revaluation surplus.
However, increase shall be recognised in P/L to the extent that it reverses a revaluation decrease of the same asset previously recognised in P/L.
Depreciation should be charged to profit or loss.
- To be allocated on a systematic basis over the asset’s useful life.
- The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, any change is accounted for prospectively as a change in estimate under Ind AS 8.
From third parties for impairment is included in profit or loss when the claim becomes receivable.
- Carrying amount of an item shall be derecognised on disposal or when it is withdrawn from use and no future economic benefits are expected from its use or disposal.
- Gain or loss arising from the de-recognition included in profit or loss.
For each class of PPE:
- Measurement bases
- Depreciation method(s) used
- Useful lives or depreciation rates
- Gross carrying amount and accumulated depreciation and impairment losses
- Reconciliation of the carrying amount at the beginning and the end of the period.
- Restrictions on title and items pledged as security for liabilities
- Expenditures to construct PPE during the period
- Contractual commitments to acquire PPE
- Compensation from third parties for items of PPE that were impaired, lost or given up that is included in profit or loss.