International Accounting Standards

IAS 1 Presentation of Financial Statements

IAS 2 Inventories

IAS 3 Consolidated Financial Statements – Originally issued 1976, effective 1

Jan 1977 Superseded in 1989 by IAS 27 and IAS 28.

IAS 4 Depreciation Accounting – Withdrawn in 1999, replaced by IAS 16, 22,

and 38, all of which were issued or revised in 1998.

IAS 5 Information to Be Disclosed in Financial Statements – Originally issued

October 1976, effective 1 January 1997. Superseded by IAS 1 in 1997

IAS 6 Accounting Responses to Changing Prices – Superseded by IAS 15,

which was withdrawn December 2003

IAS 7 Statement of Cash Flows

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 9 Accounting for Research and Development Activities – Superseded by
ISA 38 effective 1.7.99
IAS 10 Events After the Reporting Period

IAS 11 Construction Contracts

IAS 12 Income Taxes

IAS 13 Presentation of Current Assets and Current Liabilities – Superseded

byIAS 1.

IAS 14 Segment Reporting

IAS 15 Information Reflecting the Effects of Changing Prices – Withdrawn

December 2003

IAS 16 Property, Plant and Equipment

IAS 17 Leases
IAS 18 Revenue

IAS 19 Employee Benefits

IAS 20 Accounting for Government Grants and Disclosure of Government

Assistance

IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 22 Business Combinations – Superseded by IFRS 3 effective 31 March

2004

IAS 23 Borrowing Costs

IAS 24 Related Party Disclosures

IAS 25 Accounting for Investments – Superseded by IAS 39 and IAS 40

effective 2001

IAS 26 Accounting and Reporting by Retirement Benefit Plans

IAS 27 Consolidated and Separate Financial Statements

IAS 28 Investments in Associates

IAS 29 Financial Reporting in Hyperinflationary Economies

IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial

Institutions – Superseded by IFRS 7 effective 2007

IAS 31 Interests In Joint Ventures

IAS 32 Financial Instruments: Presentation – Disclosure provisions superseded

by IFRS 7 effective 2007

IAS 33 Earnings Per Share

IAS 34 Interim Financial Reporting

IAS 35 Discontinuing Operations – Superseded by IFRS 5 effective 2005

IAS 36 Impairment of Assets

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets

IAS 39 Financial Instruments: Recognition and Measurement

IAS 40 Investment Property

IAS 41 Agriculture
HIST IAS 1
March 1974 Exposure Draft E1 Disclosure of Accounting Policies

January
IAS 1 Disclosure of Accounting Policies
1975

June 1975 E5 Information to Be Disclosed in Financial Statements

October
IAS 5 Information to Be Disclosed in Financial Statements
1976

July 1978 E14 Current Assets and Current Liabilities

November
IAS 13 Presentation of Current Assets and Current Liabilities
1979

1994 IAS 1, IAS 5, and IAS 13 were reformatted

July 1996 E53 Presentation of Financial Statements

August IAS 1 (1997) Presentation of Financial Statements superseded

1997 IAS 1 (1975), IAS 5, and IAS 13 (1979)

1 July 1998 Effective date of IAS 1 (1997)

18
December Revised version of IAS 1 (2003) issued by the IASB
2003

1January
Effective date of IAS 1 (2003)
2005

18 August IAS 1 amended to add disclosures about capital

2005

16 March Exposure Draft of Proposed Amendments to IAS 1 Presentation

2006 of Financial Statements–A Revised Presentation

1 January
Effective date of August 2005 amendments to IAS 1
2007

6
September Revised IAS 1 (2007) issued
2007
1 January IAS 1 (2007) is effective for annual periods beginning on or after
2009 1 January 2009

Exposure Draft of proposed amendments to IAS 32 relating to

22 June
Puttable Instruments and Obligations Arising on Liquidation
2006
would add new disclosure requirements to IAS 1

14 February IAS 1 amended to add New Disclosure Requirements for

2008 puttable instruments and obligations arising on liquidation

1 January Effective date of February 2008 amendments for puttable

2009 instruments and obligations arising on liquidation

22 May IAS 1 amended for Annual Improvements to IFRSs 2007 in

2008 regards to classification of derivatives as current or non-current

1 January
Effective date of May 2008 amendment to IAS 1
2009

16 April IAS 1 amended for Annual Improvements to IFRSs 2009 about

2009 classification of liabilities as current

1 January
Effective date of the April 2009 revisions to IAS 1
2010

6 May 2010 IAS 1 amended for Annual Improvements to IFRSs 2010

27 May Exposure Draft of proposed amendments to IAS 1 relating to

2010 Presenting Comprehensive Income

1 January
Effective date of May 2010 amendment to IAS 1
2011

Objective of IAS 1

The objective of IAS 1 (2007) is to prescribe the basis for presentation of

general purpose financial statements, to ensure comparability both with the
entity's financial statements of previous periods and with the financial
statements of other entities. IAS 1 sets out the overall requirements for the
presentation of financial statements, guidelines for their structure and
minimum requirements for their content. [IAS 1.1] Standards for recognising,
measuring, and disclosing specific transactions are addressed in other
Standards and Interpretations. [IAS 1.3]

Scope

Applies to all general purpose financial statements based on International

Financial Reporting Standards. [IAS 1.2]

General purpose financial statements are those intended to serve users who
are not in a position to require financial reports tailored to their particular
information needs. [IAS 1.7]

Objective of Financial Statements

The objective of general purpose financial statements is to provide

information about the financial position, financial performance, and cash
flows of an entity that is useful to a wide range of users in making economic
decisions. To meet that objective, financial statements provide information
about an entity's: [IAS 1.9]

 assets
 liabilities
 equity
 income and expenses, including gains and losses
 contributions by and distributions to owners
 cash flows

That information, along with other information in the notes, assists users of
financial statements in predicting the entity's future cash flows and, in
particular, their timing and certainty.

Components of Financial Statements

A complete set of financial statements should include: [IAS 1.10]

 a statement of financial position (balance sheet) at the end of the

period
 a statement of comprehensive income for the period (or an income
statement and a statement of comprehensive income)
 a statement of changes in equity for the period
 a statement of cash flows for the period
 notes, comprising a summary of accounting policies and other
explanatory notes
When an entity applies an accounting policy retrospectively or makes a
retrospective restatement of items in its financial statements, or when it
reclassifies items in its financial statements, it must also present a statement
of financial position (balance sheet) as at the beginning of the earliest
comparative period.

An entity may use titles for the statements other than those stated above.

Reports that are presented outside of the financial statements – including

financial reviews by management, environmental reports, and value added
statements – are outside the scope of IFRSs. [IAS 1.14]

Fair Presentation and Compliance with IFRSs

The financial statements must "present fairly" the financial position, financial
performance and cash flows of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events, and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the Framework. The
application of IFRSs, with additional disclosure when necessary, is presumed
to result in financial statements that achieve a fair presentation. [IAS 1.15]

IAS 1 requires that an entity whose financial statements comply with IFRSs
make an explicit and unreserved statement of such compliance in the notes.
Financial statements shall not be described as complying with IFRSs unless
they comply with all the requirements of IFRSs (including Interpretations).
[IAS 1.16]

Inappropriate accounting policies are not rectified either by disclosure of the

accounting policies used or by notes or explanatory material. [IAS 1.16]

IAS 1 acknowledges that, in extremely rare circumstances, management may

conclude that compliance with an IFRS requirement would be so misleading
that it would conflict with the objective of financial statements set out in the
Framework. In such a case, the entity is required to depart from the IFRS
requirement, with detailed disclosure of the nature, reasons, and impact of the
departure. [IAS 1.19-20]

Going Concern

An entity preparing IFRS financial statements is presumed to be a going

concern. If management has significant concerns about the entity's ability to
continue as a going concern, the uncertainties must be disclosed. If
management concludes that the entity is not a going concern, the financial
statements should not be prepared on a going concern basis, in which case
IAS 1 requires a series of disclosures. [IAS 1.25]

Accrual Basis of Accounting

IAS 1 requires that an entity prepare its financial statements, except for cash
flow information, using the accrual basis of accounting. [IAS 1.27]

Consistency of Presentation

The presentation and classification of items in the financial statements shall

be retained from one period to the next unless a change is justified either by a
change in circumstances or a requirement of a new IFRS. [IAS 1.45]

Materiality and Aggregation

Each material class of similar items must be presented separately in the

financial statements. Dissimilar items may be aggregated only if the are
individually immaterial. [IAS 1.29]

Offsetting> Assets and liabilities, and income and expenses, may not be
offset unless required or permitted by an IFRS. [IAS 1.32]

Comparative Information

IAS 1 requires that comparative information shall be disclosed in respect of

the previous period for all amounts reported in the financial statements, both
face of financial statements and notes, unless another Standard requires
otherwise. [IAS 1.38]

If comparative amounts are changed or reclassified, various disclosures are

required. [IAS 1.41]

Structure and Content of Financial Statements in General

Clearly identify: [IAS 1.50]

 the financial statements

 the reporting enterprise
 whether the statements are for the enterprise or for a group
 the date or period covered
 the presentation currency
 the level of precision (thousands, millions, etc.)
Reporting Period

There is a presumption that financial statements will be prepared at least

annually. If the annual reporting period changes and financial statements are
prepared for a different period, the entity must disclose the reason for the
change and a warning about problems of comparability. [IAS 1.36]

Statement of Financial Position (Balance Sheet)

An entity must normally present a classified statement of financial position,

separating current and noncurrent assets and liabilities. Only if a presentation
based on liquidity provides information that is reliable and more relevant
may the current/noncurrent split be omitted. [IAS 1.60] In either case, if an
asset (liability) category combines amounts that will be received (settled)
after 12 months with assets (liabilities) that will be received (settled) within
12 months, note disclosure is required that separates the longer-term amounts
from the 12-month amounts. [IAS 1.61]

Current assets are cash; cash equivalent; assets held for collection, sale, or
consumption within the entity's normal operating cycle; or assets held for
trading within the next 12 months. All other assets are noncurrent. [IAS 1.66]

Current liabilities are those to be settled within the entity's normal operating
cycle or due within 12 months, or those held for trading, or those for which
the entity does not have an unconditional right to defer payment beyond 12
months. Other liabilities are noncurrent. [IAS 1.69]

When a long-term debt is expected to be refinanced under an existing loan

facility and the entity has the discretion the debt is classified as non-current,
even if due within 12 months. [IAS 1.73]

If a liability has become payable on demand because an entity has breached

an undertaking under a long-term loan agreement on or before the reporting
date, the liability is current, even if the lender has agreed, after the reporting
date and before the authorisation of the financial statements for issue, not to
demand payment as a consequence of the breach. [IAS 1.74] However, the
liability is classified as non-current if the lender agreed by the reporting date
to provide a period of grace ending at least 12 months after the end of the
reporting period, within which the entity can rectify the breach and during
which the lender cannot demand immediate repayment. [IAS 1.75]

Minimum items on the face of the statement of financial position [IAS 1.54]

 (a) property, plant and equipment

  (b) investment property
 (c) intangible assets
 (d) financial assets (excluding amounts shown under (e), (h), and (i))
 (e) investments accounted for using the equity method
 (f) biological assets
 (g) inventories
 (h) trade and other receivables
 (i) cash and cash equivalents
 (j) assets held for sale
 (k) trade and other payables
 (l) provisions
 (m) financial liabilities (excluding amounts shown under (k) and (l))
 (n) liabilities and assets for current tax, as defined in IAS 12
 (o) deferred tax liabilities and deferred tax assets, as defined in IAS
12
 (p) liabilities included in disposal groups
 (q) non-controlling interests , presented within equity and
 (r) issued capital and reserves attributable to owners of the parent

Additional line items may be needed to fairly present the entity's financial
position. [IAS 1.54]

IAS 1 does not prescribe the format of the balance sheet. Assets can be
presented current then noncurrent, or vice versa, and liabilities and equity can
be presented current then noncurrent then equity, or vice versa. A net asset
presentation (assets minus liabilities) is allowed. The long-term financing
approach used in UK and elsewhere – fixed assets + current assets - short
term payables = long-term debt plus equity – is also acceptable.

Regarding issued share capital and reserves, the following disclosures are
required: [IAS 1.79]

 numbers of shares authorised, issued and fully paid, and issued but
not fully paid
 par value
 reconciliation of shares outstanding at the beginning and the end of
the period
 description of rights, preferences, and restrictions
 treasury shares, including shares held by subsidiaries and associates
 shares reserved for issuance under options and contracts
 a description of the nature and purpose of each reserve within equity
Statement of Comprehensive Income

Comprehensive income for a period includes profit or loss for that period
plus other comprehensive income recognised in that period. As a result of the
2003 revision to IAS 1, the Standard is now using 'profit or loss' rather than
'net profit or loss' as the descriptive term for the bottom line of the income
statement.

All items of income and expense recognised in a period must be included in

profit or loss unless a Standard or an Interpretation requires otherwise. [IAS
1.88] Some IFRSs require or permit that some components to be excluded
from profit or loss and instead to be included in other comprehensive income.
[IAS 1.89]

The components of other comprehensive income include:

 changes in revaluation surplus (IAS 16 and IAS 38)

 actuarial gains and losses on defined benefit plans recognised in
accordance with IAS 19
 gains and losses arising from translating the financial statements of a
foreign operation (IAS 21)
 gains and losses on remeasuring available-for-sale financial assets
(IAS 39)
 the effective portion of gains and losses on hedging instruments in a
cash flow hedge (IAS 39).

An entity has a choice of presenting:

 a single statement of comprehensive income or

 two statements:
o an income statement displaying components of profit or loss
and
o a statement of comprehensive income that begins with profit
or loss (bottom line of the income statement) and displays
components of other comprehensive income [IAS 1.81]

Minimum items on the face of the statement of comprehensive income

should include: [IAS 1.82]

 revenue
 finance costs
 share of the profit or loss of associates and joint ventures accounted
for using the equity method
  tax expense
 a single amount comprising the total of (i) the post-tax profit or loss
of discontinued operations and (ii) the post-tax gain or loss recognised
on the disposal of the assets or disposal group(s) constituting the
discontinued operation
 profit or loss
 each component of other comprehensive income classified by nature
 share of the other comprehensive income of associates and joint
ventures accounted for using the equity method
 total comprehensive income

The following items must also be disclosed in the statement of

comprehensive income as allocations for the period: [IAS 1.83]

 profit or loss for the period attributable to non-controlling interests

and owners of the parent
 total comprehensive income attributable to non-controlling interests
and owners of the parent

Additional line items may be needed to fairly present the entity's results of
operations. [IAS 1.85]

No items may be presented in the statement of comprehensive income (or in

the income statement, if separately presented) or in the notes as 'extraordinary
items'. [IAS 1.87]

Certain items must be disclosed separately either in the statement of

comprehensive income or in the notes, if material, including: [IAS 1.98]

 write-downs of inventories to net realisable value or of property, plant

and equipment to recoverable amount, as well as reversals of such
write-downs
 restructurings of the activities of an entity and reversals of any
provisions for the costs of restructuring
 disposals of items of property, plant and equipment
 disposals of investments
 discontinuing operations
 litigation settlements
 other reversals of provisions

Expenses recognised in profit or loss should be analysed either by nature

(raw materials, staffing costs, depreciation, etc.) or by function (cost of sales,
selling, administrative, etc). [IAS 1.99] If an entity categorises by function,
then additional information on the nature of expenses – at a minimum
depreciation, amortisation and employee benefits expense – must be
disclosed. [IAS 1.104]

Statement of Changes in Equity

IAS 1 requires an entity to present a statement of changes in equity as a

separate component of the financial statements. The statement must show:
[IAS 1.106]

 total comprehensive income for the period, showing separately

amounts attributable to owners of the parent and to non-controlling
interests
 the effects of retrospective application, when applicable, for each
component
 reconciliations between the carrying amounts at the beginning and the
end of the period for each component of equity, separately disclosing:
o profit or loss
o each item of other comprehensive income
o transactions with owners, showing separately contributions by
and distributions to owners and changes in ownership interests
in subsidiaries that do not result in a loss of control

The following amounts may also be presented on the face of the statement of
changes in equity, or they may be presented in the notes: [IAS 1.107]

 amount of dividends recognised as distributions, and

 the related amount per share

Notes to the Financial Statements

The notes must: [IAS 1.112]

 present information about the basis of preparation of the financial

statements and the specific accounting policies used
 disclose any information required by IFRSs that is not presented
elsewhere in the financial statements and
 provide additional information that is not presented elsewhere in the
financial statements but is relevant to an understanding of any of them

Notes should be cross-referenced from the face of the financial statements to

the relevant note. [IAS 1.113]

IAS 1.114 suggests that the notes should normally be presented in the
following order:

 a statement of compliance with IFRSs

 a summary of significant accounting policies applied, including: [IAS
1.117]
o the measurement basis (or bases) used in preparing the
financial statements
o the other accounting policies used that are relevant to an
understanding of the financial statements
 supporting information for items presented on the face of the
statement of financial position (balance sheet), statement of
comprehensive income (and income statement, if presented),
statement of changes in equity and statement of cash flows, in the
order in which each statement and each line item is presented
 other disclosures, including:
o contingent liabilities (see IAS 37) and unrecognised
contractual commitments
o non-financial disclosures, such as the entity's financial risk

Disclosure of judgements. New in the 2003 revision to IAS 1, an entity must

disclose, in the summary of significant accounting policies or other notes, the
judgements, apart from those involving estimations, that management has
made in the process of applying the entity's accounting policies that have the
most significant effect on the amounts recognised in the financial statements.
[IAS 1.122]

Examples cited in IAS 1.123 include management's judgements in

determining:

 whether financial assets are held-to-maturity investments

 when substantially all the significant risks and rewards of ownership
of financial assets and lease assets are transferred to other entities
 whether, in substance, particular sales of goods are financing
arrangements and therefore do not give rise to revenue; and
 whether the substance of the relationship between the entity and a
special purpose entity indicates control

Disclosure of key sources of estimation uncertainty. Also new in the 2003

revision to IAS 1, an entity must disclose, in the notes, information about the
key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year. [IAS 1.125] These disclosures do not involve
disclosing budgets or forecasts. [IAS 1.130]

The following other note disclosures are required by IAS 1.126 if not
disclosed elsewhere in information published with the financial statements:

 domicile and legal form of the entity

 country of incorporation
 address of registered office or principal place of business
 description of the entity's operations and principal activities
 if it is part of a group, the name of its parent and the ultimate parent
of the group
 if it is a limited life entity, information regarding the length of the life

Other Disclosures

Disclosures about Dividends

In addition to the distributions information in the statement of changes in

equity (see above), the following must be disclosed in the notes: [IAS 1.137]
" the amount of dividends proposed or declared before the financial
statements were authorised for issue but not recognised as a distribution to
owners during the period, and the related amount per share and " the amount
of any cumulative preference dividends not recognised.

Capital Disclosures

An entity should disclose information about its objectives, policies and

processes for managing capital. [IASA 1.134] To comply with this, the
disclosures include: [IAS1.135]

 qualitative information about the entity's objectives, policies and

processes for managing capital, including
o description of capital it manages
o nature of external capital requirements, if any
o how it is meeting its objectives
 quantitative data about what the entity regards as capital
 changes from one period to another
 whether the entity has complied with any external capital
requirements and
 if it has not complied, the consequences of such non-compliance.

Disclosures about Puttable Financial Instruments

IAS 1.136A requires the following additional disclosures if an entity has a
puttable instrument that is classified as an equity instrument:

 summary quantitative data about the amount classified as equity

 the entity's objectives, policies and processes for managing its
obligation to repurchase or redeem the instruments when required to
do so by the instrument holders, including any changes from the
previous period
 the expected cash outflow on redemption or repurchase of that class
of financial instruments and
 information about how the expected cash outflow on redemption or
repurchase was determined.

Terminology

The 2007 comprehensive revision to IAS 1 introduced some new

terminology. Consequential amendments were made at that time to all of the
other existing IFRSs, and the new terminology has been used in subsequent
IFRSs including amendments. IAS 1.8 states: "Although this Standard uses
the terms 'other comprehensive income', 'profit or loss' and 'total
comprehensive income', an entity may use other terms to describe the totals
as long as the meaning is clear. For example, an entity may use the term 'net
income' to describe profit or loss." Also, IAS 1.57(b) states: "The
descriptions used and the ordering of items or aggregation of similar items
may be amended according to the nature of the entity and its transactions, to
provide information that is relevant to an understanding of the entity's
financial position."

Term before 2007 revision

Term as amended by IAS 1 (2007)
of IAS 1
balance sheet statement of financial position
cash flow statement statement of cash flows
statement of comprehensive income
income statement (income statement is retained in case of a
two-statement approach)

recognised in the income recognised in profit or loss

 statement

recognised [directly] in equity recognised in other comprehensive

(only for OCI components) income

recognised [directly] in equity

recognised outside profit or loss (either
(for recognition both in OCI
in OCI or equity)
and equity)
removed from equity and
reclassified from equity to profit or loss
recognised in profit or loss
as a reclassification adjustment
('recycling')

Standard or/and Interpretation IFRS

on the face of in
owners (exception for 'ordinary equity
equity holders
holders')
balance sheet date end of the reporting period
reporting date end of the reporting period
after the balance sheet date after the reporting period

IAS 16
August Exposure Draft E18 Accounting for Property, Plant and
1980 Equipment in the Context of the Historical Cost System

March
IAS 16 Accounting for Property, Plant and Equipment
1982

1 January Effective date of IAS 16 (1982)

1983

May 1992 Exposure Draft E43 Property, Plant and Equipment

IAS 16 Accounting for Property, Plant and Equipment

December
(revised as part of the 'Comparability of Financial
1993
Statements' project)

1 January Effective date of IAS 16 (1993) Property, Plant and

1995 Equipment

1998 IAS 16 was revised by IAS 36 Impairment of Assets

1 July
IAS 16 (1998) effective date of 1998 revisions to IAS 16
1999

18
December Revised version of IAS 16 issued by the IASB
2003

1 January
Effective date of IAS 16 (Revised 2003)
2005

22 May IAS 16 amended for 'Annual Improvements to IFRSs

2008 2007 about routine sales of assets held for rental

1 January
Effective date of May 2008 amendment to IAS 16
2009
Objective of IAS 16

The objective of IAS 16 is to prescribe the accounting treatment for property,

plant, and equipment. 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.

Scope

IAS 16 does not apply to

 assets classified as held for sale in accordance with IFRS 5

 exploration and evaluation assets (IFRS 6)
 biological assets related to agricultural activity (see IAS 41) or
 mineral rights and mineral reserves such as oil, natural gas and similar
non-regenerative resources

The standard does apply to property, plant, and equipment used to develop or
maintain the last two categories of assets. [IAS 16.3]

Recognition

Items of property, plant, and equipment should be recognised as assets when it is

probable that: [IAS 16.7]

 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.

This recognition principle is applied to all property, plant, and equipment costs at
the time they are incurred. These costs include costs incurred initially to acquire
or construct an item of property, plant and equipment and costs incurred
subsequently to add to, replace part of, or service it.

IAS 16 does not prescribe the unit of measure for recognition – what constitutes
an item of property, plant, and equipment. [IAS 16.9] Note, however, that if the
cost model is used (see below) each part of an item of property, plant, and
equipment with a cost that is significant in relation to the total cost of the item
must be depreciated separately. [IAS 16.43]

IAS 16 recognises that parts of some items of property, plant, and equipment may
require replacement at regular intervals. The carrying amount of an item of
property, plant, and equipment will include the cost of replacing the part of such
an item when that cost is incurred if the recognition criteria (future benefits and
measurement reliability) are met. The carrying amount of those parts that are
replaced is derecognised in accordance with the derecognition provisions of IAS
16.67-72. [IAS 16.13]

Also, continued operation of an item of property, plant, and equipment (for

example, an aircraft) may require regular major inspections for faults regardless
of whether parts of the item are replaced. When each major inspection is
performed, its cost is recognised in the carrying amount of the item of property,
plant, and equipment as a replacement if the recognition criteria are satisfied. If
necessary, the estimated cost of a future similar inspection may be used as an
indication of what the cost of the existing inspection component was when the
item was acquired or constructed. [IAS 16.14]

Initial Measurement

An item of property, plant and equipment should initially be recorded at cost.

[IAS 16.15] Cost includes all costs necessary to bring the asset to working
condition for its intended use. This would include not only its original purchase
price but also costs of site preparation, delivery and handling, installation, related
professional fees for architects and engineers, and the estimated cost of
dismantling and removing the asset and restoring the site (see IAS 37, Provisions,
Contingent Liabilities and Contingent Assets). [IAS 16.16-17]

If payment for an item of property, plant, and equipment is deferred, interest at a

market rate must be recognised or imputed. [IAS 16.23]

If an asset is acquired in exchange for another asset (whether similar or dissimilar

in nature), the cost will be measured at the fair value unless (a) the exchange
transaction lacks commercial substance or (b) the fair value of neither the asset
received nor the asset given up is reliably measurable. If the acquired item is not
measured at fair value, its cost is measured at the carrying amount of the asset
given up. [IAS 16.24]

Measurement Subsequent to Initial Recognition

IAS 16 permits two accounting models:

 Cost Model. The asset is carried at cost less accumulated depreciation and
impairment. [IAS 16.30]
 Revaluation Model. The asset is carried at a revalued amount, being its
fair value at the date of revaluation less subsequent depreciation and
impairment, provided that fair value can be measured reliably. [IAS 16.31]

The Revaluation Model

Under the revaluation model, revaluations should be carried out regularly, so that
the carrying amount of an asset does not differ materially from its fair value at
the balance sheet date. [IAS 16.31]

If an item is revalued, the entire class of assets to which that asset belongs should
be revalued. [IAS 16.36]

Revalued assets are depreciated in the same way as under the cost model (see
below).

If a revaluation results in an increase in value, it should be credited to other

comprehensive income and accumulated in equity under the heading "revaluation
surplus" unless it represents the reversal of a revaluation decrease of the same
asset previously recognised as an expense, in which case it should be recognised
as income. [IAS 16.39]

A decrease arising as a result of a revaluation should be recognised as an expense

to the extent that it exceeds any amount previously credited to the revaluation
surplus relating to the same asset. [IAS 16.40]

When a revalued asset is disposed of, any revaluation surplus may be transferred
directly to retained earnings, or it may be left in equity under the heading
revaluation surplus. The transfer to retained earnings should not be made through
the income statement (that is, no "recycling" through profit or loss). [IAS 16.41]

Depreciation (Cost and Revaluation Models)

For all depreciable assets:

The depreciable amount (cost less residual value) should be allocated on a

systematic basis over the asset's useful life [IAS 16.50].

The residual value and the useful life of an asset should be reviewed at least at
each financial year-end and, if expectations differ from previous estimates, any
change is accounted for prospectively as a change in estimate under IAS 8. [IAS
16.51]

The depreciation method used should reflect the pattern in which the asset's
economic benefits are consumed by the entity [IAS 16.60];

The depreciation method should be reviewed at least annually and, if the pattern
of consumption of benefits has changed, the depreciation method should be
changed prospectively as a change in estimate under IAS 8. [IAS 16.61]

Depreciation should be charged to the income statement, unless it is included in

the carrying amount of another asset [IAS 16.48].

Depreciation begins when the asset is available for use and continues until the
asset is derecognised, even if it is idle. [IAS 16.55]

Recoverability of the Carrying Amount

IAS 36 requires impairment testing and, if necessary, recognition for property,

plant, and equipment. An item of property, plant, or equipment shall not be
carried at more than recoverable amount. Recoverable amount is the higher of an
asset's fair value less costs to sell and its value in use.

Any claim for compensation from third parties for impairment is included in
profit or loss when the claim becomes receivable. [IAS 16.65]

Derecogniton (Retirements and Disposals)

An asset should be removed from the balance sheet on disposal or when it is
withdrawn from use and no future economic benefits are expected from its
disposal. The gain or loss on disposal is the difference between the proceeds and
the carrying amount and should be recognised in the income statement. [IAS
16.67-71]

If an entity rents some assets and then ceases to rent them, the assets should be
transferred to inventories at their carrying amounts as they become held for sale
in the ordinary course of business. [IAS 16.68A]

Disclosure

For each class of property, plant, and equipment, disclose: [IAS 16.73]

 basis for measuring carrying amount

 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, showing:
o additions
o disposals
o acquisitions through business combinations
o revaluation increases or decreases
o impairment losses
o reversals of impairment losses
o depreciation
o net foreign exchange differences on translation
o other movements

Also disclose: [IAS 16.74]

 restrictions on title
 expenditures to construct property, plant, and equipment during the
period
  contractual commitments to acquire property, plant, and equipment
 compensation from third parties for items of property, plant, and
equipment that were impaired, lost or given up that is included in profit
or loss

If property, plant, and equipment is stated at revalued amounts, certain additional

disclosures are required: [IAS 16.77]

 the effective date of the revaluation

 whether an independent valuer was involved
 the methods and significant assumptions used in estimating fair values
 the extent to which fair values were determined directly by reference to
observable prices in an active market or recent market transactions on
arm's length terms or were estimated using other valuation techniques
 for each revalued class of property, the carrying amount that would have
been recognised had the assets been carried under the cost model
 the revaluation surplus, including changes during the period and any
restrictions on the distribution of the balance to shareholders