IAS

16 Property, Plant and Equipment

IAS 16 PROPERTY,
PLANT AND EQUIPMENT

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Measurement
Definition & at Recognition
Recognition + Subsequent
Costs

IAS 16

Measurement
Derecognition after
Recognition

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IAS 16 Property, Plant and Equipment

Property, Plant and Equipment

Held by an entity > 1 period

- In a production of goods/rendering services

- For rental to others

- For administrative purposes

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Recognition of PPE

Future economic benefits Cost reliably measurable

Risks Rewards

Spare parts & Servicing Equipment

Inventory Property

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IAS 16 Property, Plant and Equipment

Measurement at
Recognition

COST Purchase price Directly attributable costs Removal costs

- site preparation
û
- employee benefits (IAS 19) - admin & general o/h - training staff

- initial delivery, installation - interest (IAS 23) - opening new facility - abnormal waste

- professional fees - tests (if inevitable) - initial operating loss - internal profits

Cash price equivalent If payment is deferred Discount to PV

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Exchanges of Assets

Machine + 10 000 EUR

Company A Commercial Substance Company B

Lorry

Cost of truck = Cost of machine =

FV of machine + 10 000 EUR FV of truck – 10 000 EUR
= FV of truck = FV of machine

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IAS 16 Property, Plant and Equipment

Subsequent
Costs

Future economic benefits (risks rewards) + Cost reliably measurable

NO
S
YE
ASSET EXPENSE

- major inspections - day-to-day servicing

- replacements of certain parts - replacement of small parts

- plant modification, upgrades

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Subsequent Measurement of PPE

Cost Model Revaluation Model

COST FAIR VALUE

Subsequent Accumulated
Accumulated Depreciation Depreciation

Accumulated Impairment Loss Subsequent Accumulated

Impairment Loss

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IAS 16 Property, Plant and Equipment

Depreciation

=allocation of Depreciable Amount over its Useful Life

on Systematic Basis

HOW MUCH HOW LONG HOW / IN WHAT MANNER

= Cost
Depreciation Method

- Residual Value Period N. of Units

Debit Profit or Loss (Asset) / Credit PPE

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Depreciation

Useful Life = Judgment

-expected usage

-expected wear & tear

- obsolescence

- legal or other limits

G Useful Life ≠ Economic Life

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IAS 16 Property, Plant and Equipment

Depreciation
Depreciation Methods:

- Straight-line Method

- Diminishing balance Method

- Units of production Method

GUseful Life, Residual Value and Depreciation Method should be reviewed at least at
each financial year-end

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Revaluation Model

Revalued Amount = Fair Value at the Date of Revaluation

- subsequent accumulated depreciation - subsequent impairment loss

- annually - every 3, 5 years

G Simultaneous revaluation of Entire Class of assets is required

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IAS 16 Property, Plant and Equipment

Revaluation Model

Carrying Amount

INCREASES DECREASES
as a result of revaluation as a result of revaluation

Credit to Equity Credit to Income Debit to Expenses Debit to Equity

– Revaluation - If reverses –if reverses previous
Surplus previous decrease increase in
in profit or loss revaluation surplus

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Derecognition of PPE

On disposal No future economic

benefits expected

GAIN or LOSS

= Net Disposal Proceeds - Carrying Amount

G Gain or loss is included in Profit or Loss, but not as Revenue

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IAS 16 Property, Plant and Equipment

www.IFRSbox.com IAS 16 – Property, Plant and Equipment