Property, Plant

and Equipment
By: Maria Monica L. Dacullo
BSA 1- Set C
Property, Plant and Equipment

MAJOR
CHARACTERISTICS

Used over a period

Tangible Assets Used in Business of more than one
year
 Examples of Property, Plant and Equipment

 Land  Motor Vehicle

 Land Improvements  Furniture and Fixture
 Building  Office Equipment
 Machinery  Patterns, molds and dies
 Ship  Tools
 Aircraft  Bearer Plants
 Recognition of Property, Plant and Equipment

 It is probable that future  The cost of the asset can be

economic benefits associated measured reliably.
with the asset will flow to the
entity.
 Measurement at
Recognition
An item of Property, Plant and Equipment that qualifies for
recognition as an asset shall be measured at COST
 Elements of Cost

Cost directly Initial estimate

Purchase Price
attributable of the cost
Directly Attributable Costs
(examples that qualify for recognition)

• Cost of employee
• Cost of site preperation
• Initial delivery and handling cost
• Installation and assembly cost
• Professional fee
• Cost of testing
Costs not qualifying for recognition

• Cost of opening a new facility

• Cost of introducing new product/services and advertising promotion
• Cost of business in new location/new costumers; cost of staff training
• Administration and other general overheard cost
• Cost incurred
• Initial opening lost
• Cost of relocating/reorganizing
Measurement after Recognition

Cost Model Revaluation Model

• Carried at revalued carrying
• Carried at cost less any amount.
accumulated depreciation
and any accumulated
impairment loss
Acquisition on a cash basis
The cost of an item of property, plant and
equipment is the cash price equivalent at
the recognition date.
Acquisition on account
The cost of the asset is equal to the
invoice price minus the discount,
regardless of whether the discount is
taken or not.
Acquisition on installment basis
When payment for item of PPE is deferred
beyond normal credit terms, the cost is
the cash price equivalent.
 Issuance of share capital
Through the issuance of share capital, the property shall be measured at
an amount equal to the following in order of priority:

• Fair Value of the Property Received

• Fair Value of the Share Capital
• Fair Value or stated value of the Share Capital
 Issuance of bonds payable
Bonds payable is measured in the following order:

• Fair Value of Bonds Payable

• Fair Value of Asset Received
• Face Amount of Bonds Payable
Exchange
Exchange is recognized at carrying amount
if the exchange transaction lacks
commercial substance.
Definition of Commercial Substance
a new notion and is defined as the event or
transaction causing the cash flows of the entity to
change significantly by reason of the exchange.
THANK YOU!!!
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