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Equipment
CA. K. SHANMUGANATHAN
FCA.,ACMA
Ind AS-16 Property, Plant & Equipment
Objective:
The objective of IAS 16 is to prescribe the accounting treatment for
property, plant, and equipment. The principal issues are:
- the timing of recognition of asset;
- the determination of their carrying amounts; and
- the depreciation charges to be recognized.
Scope
Ind AS-16 applied to all Property, Plant & Equipment until and unless any
other standard requires or permits a different accounting treatment.
This Standard does not apply to :
a)PPE classified as held for sale in accordance with Ind AS 105
b)Biological assets related to agricultural activity other than bearer plants
c)The recognition and measurement of exploration and evaluation assets
d)Mineral rights and mineral reserves such as oil, natural gas and similar
non-regenerative resources
IAS-16 Property, Plant & Equipment
Definition:
Property, Plant & Equipment are tangible items that:
- are held for use in the production or supply of goods or services, or
- for rental to others, or
- for administrative purposes; and
- are expected to be used during more than one period.
Recognition:
The cost of an item or Property, Plant & Equipment shall be recognized as
an asset if, and only if:
a) it is probable that future economic benefits associated with the item
will flow to the entity; and
b) The cost of the item can be measured reliably.
Measurement at Recognition
An item of Property, Plant & Equipment that qualifies for recognition as an
asset shall be measured at its cost.
Which is Bearer Plants?
Ind AS-16 Property, Plant & Equipment
Elements of Cost:
- Purchase price + (Import duties + Non refundable taxes) - (Trade
Discounts + Rebates)
- Directly attributable costs.
- Initial estimate of the cost of dismantling and removing the item and
restoring the site in which it is located.
Cost – Accumulated
Depreciation- Acc Revaluation
impairment Loss
Asset Dr 20,000
To OCI Cr 20,000
The net result is that the asset has a carrying amount of Rs. 65,000
(100,000 – 55,000 + 20,000).
Practical Example Solution
Method – II:
Entries to be Made:
- Derecognition:
– On disposal, or
– When no future benefits expected from use or
disposal.
- Difference between carrying amount and net disposal
proceeds recognised as gain/loss in profit or loss.
- Gains not classified as revenue.
- Apply Ind AS 18 Revenue in determining date of
disposal.
- Consideration receivable measured at fair value.
Subsequent costs
- Do not recognize day-to-day servicing costs of the asset
in the carrying amount (Recurring costs).
Revaluation surplus
Decrease in liability (except reversal of
previous revaluation deficit)
Profit or loss
(except credit balance
Increase in liability
remaining in
revaluation surplus)
- Measurement basis
- Depreciation methods
- Useful lives or depreciation rates
- Gross carrying amount and accumulated depreciation at
beginning and end of period
- Reconciliation at beginning and end of period showing:
- Comparative information required
Presentation & Disclosure