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Pas 16 - Property, Plant, & Equipment: Conceptual Framework and Accounting Standards

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352 views5 pages

Pas 16 - Property, Plant, & Equipment: Conceptual Framework and Accounting Standards

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Meg shark
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NATIONAL UNIVERSITY

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

PAS 16 – PROPERTY, PLANT, &


EQUIPMENT
Conceptual Framework and Accounting Standards
PREPARED BY: ALCOBER, CASEY G.
REVIEWED BY:

Disclaimer: The National University Junior Philippine Institute of Accountants together with the
BS Accountancy students of National University made every effort to ensure and help every
student during this time of the pandemic. Acknowledgment for the owner/s of the
copyrighted material used in preparing these materials is properly given and cited in every
handout. Thus, the production of these constitutes a fair use of copyrighted material as
provided in Sec. 185 of Republic Act 8293 or the “Intellectual Property Code of The
Philippines”, which states, “The fair use of a copyrighted work for criticism, comment,
news reporting, teaching including multiple copies for classroom use, scholarship, research,
and similar purposes is not an infringement of copyright [...]The purpose and character of
the use, including whether such use is of a commercial nature or is for non-profit educational
purposes.” Hence, no part of this handout may be subsequently distributed, uploaded,
published, displayed, reproduced, modified, and sold for profit in any form without
permission from the preparers. Furthermore, the violation of these acts is punishable by law. In
no event will the National University Junior Philippine Institute of Accountants together
with the preparers and faculty members be liable to any violation committed by the users of these
handouts.
EXCLUSIVE FOR ACCOUNTANCY STUDENTS OF NATIONAL UNIVERSITY ONLY

Definition
Property, plant and equipment are tangible items that:

 are held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes; and
 are expected to be used during more than one period.

It also includes bearer plants related to agricultural activity but it does not apply
to the produce on bearer plants.

Recognition
The cost of an item of property, plant and equipment is recognized as an asset if,
and only if:

 it is probable that future economic benefits associated with the item will
flow to the entity; and
 the cost of the item can be measured reliably.

Initial Measurement
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NATIONAL UNIVERSITY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

 measured at cost

Cost includes:

 its purchase price, including import duties and non-refundable purchase


taxes, after deducting trade discounts and rebates;
 any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management; and
 the estimated costs of dismantling and removing the item and restoring
the site on which it is located, unless those costs relate to inventories
produced during that period.

Proceeds from selling items produced while bringing an item of property, plant
and equipment to the location and condition necessary for it to be capable of
operating in the manner intended by management are not deducted from the
cost of the item of property, plant and equipment but recognized in profit or loss.
Measurement subsequent to initial recognition
 Cost model – cost less any accumulated depreciation and any
impairment losses
 Revaluation model – an item of property, plant and equipment whose fair
value can be measured reliably is carried at a revalued amount, which is
its fair value at the date of the revaluation less any subsequent
accumulated depreciation and subsequent accumulated impairment
losses.

Revaluation increase – recognized in other comprehensive income and


accumulated in equity under the heading “revaluation surplus”, unless
they reverse a previous revaluation decrease. Revaluation decreases are
recognized in profit or loss unless they reverse a previous revaluation
increase. [PAS 16.39]

Revaluation decrease – recognized as an expense to the extent that it


exceeds any amount previously credited to the revaluation surplus
relating to the same asset. [PAS 16.40]

Depreciation
 is the systematic allocation of the depreciable amount of an asset over its
useful life. Depreciable amount is the cost of an asset, or other amount
substituted for cost, less its residual value.
 should be charged to profit or loss, unless it is included in the carrying
amount of another asset [PAS 16.48].
 begins when the asset is available for use and continues until the asset is
derecognized, even if it is idle. [PAS 16.55]

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NATIONAL UNIVERSITY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

Derecognition
 when it is withdrawn from use
 no future economic benefits are expected from its disposal
 any gain or loss on disposal should be recognized in profit and loss
o gain or loss on disposal is the difference between the proceeds and
the carrying amount.

SOURCES:
https://www.iasplus.com/en/standards/ias/ias16
https://www.ifrs.org/issued-standards/list-of-standards/ias-16-property-plant-and-equipment/
Valix, C., Peralta, J. F., & Valix, C. (2018). Conceptual Framework and Accounting Standards. Manila.

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JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

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NATIONAL UNIVERSITY
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

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