PAS 16
PROPERTY PLANT
AND EQUIPMENT
LEARNING
OBJECTIVES
State the recognition criteria, initial
and subsequent measurement of
PPE
Apply the principles of PAS 16 in
basic computations.
PAS 16 applies to all items of PPE except
a. Assets clasified as held for sale
b. Biological assets other than bearer plants
c. Recognition and measurement of exploration and evaluation assets
d. Mineral rights and mineral reserves
PAS 16 applies to PPE used to develop or maintain the assets described
in b - d.
Property, Plant and Equipment (PPE)
1. Tangible Assets
2. Used in business
3. Long-term in nature
An item of PPE is recognized if:
• it is probable that the future economic benefits associated
with the item will flow to the entity.
• the cost of the item can be measured reliably
Cost comprises the following:
a. Purchase price plus non-refundable taxes minus trade and cash discounts
b. direct costs
c. initial estimate of dismantlement, removal and restoration costs
Initial Measurement
Incidental Operations
- Income and related expenses of incidental operations are recognized in profit or loss,
and hence do not affect the measurement of cost of a PPE.
Self-constructed assets
- cost is determined using the same principles as for an acquired asset.
- excludes internal profits and the cost of abnormal amounts of wasted material, labor
and other resources.
Bearer Plant
- A living plant that is used for production or supply of agricultural produce.
- expected to bear produce for more than one period of time
- has remote likelihood of being sold as agricultural produce, except for incidental scrap
sales.
Measuremen
- Cost is measured at the cash price
equivalent at the acquisition date.
- The cost of a PPE acquired through
t of Cost
an exchange of non-monetary assets
is measured using the following
order of priority
1. Fair value of the asset given up
2. Fair value on the asset received
3. Carrying amount of the asset
given up
Subsequent
Measuremen
t
Cost Model Revaluation Model
- PPE is carried at its cost less any - A PPE is carried at its
accumulated depreciation and any fair value at the date of the
accumulated impairment losses.
revaluation less any
subsequent accumulated
depreciation and subsequent
accumulated impairment
losses.
Depreciation
- Systematic allocation of the depreciable amount of an asset over its useful
life
- Starts when the asset is available for use
- Stops when the asset is:
a. derecognized
b. classified as held for sale
c. fully depreciated
Straight-line method of depreciation
Revaluation
- An increase or decrease in the carrying
amount of a PPE resulting from
revaluation is recognized in other
surplus
comprehensive income and accumulated
in equity.
- Except for the following:
a. Increase that represents a reversal of
a previous impairment loss is recognized
in profit or loss as impairment gain.
b. Decrease in excess of the credit
balance in the “Revaluation surplus” of
the asset is recognized in profit or loss as
impairment loss.
The revaluation increase or decrease is After revaluation, a revalued asset is
computed by using this formula: depreciated based on its fair value
Subsequent
a. If the revaluation asset is non-
depreciable, the whole of the
accounting for
revaluation surplus is transferred
directly to retained earnings
revaluation
when the asset is derecognized
surplus
b. If the revalued asset is
depreciable, a portion of the
revaluation surplus may be
transferred directly to retained
earnings as the asset is used.
Derecognitio
- refers to the removal of a
previously recognized asset or
liability from the entity's
n
statement of financial position.
- The carrying amount of PPE
is derecognized when:
a. it is disposed
b. no future economic
benefits are expected from the
asset's use or disposal.
Special Case
Disclosure
-refers to the act of releasing all relevant information on a
company that may influence an investment decision.
- include those related to a company's financial condition,
operating results and management compensation
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