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    Ias 16

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    Niharika Mishra
    IAS 16 provides guidance on accounting for property, plant, and equipment (PPE). Key points include: - PPE is recognized if it is held for use in production/rental/admin and is expected to be used for more than one period. - Initial cost includes purchase price, installation costs, and borrowing costs if criteria are met. - Subsequent costs are capitalized if they improve capacity but not if for maintenance. - PPE can be measured using cost or revaluation models.

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    Ias 16

    Uploaded by

    Niharika Mishra
    347 views26 pages
    IAS 16 provides guidance on accounting for property, plant, and equipment (PPE). Key points include: - PPE is recognized if it is held for use in production/rental/admin and is expected to be used for more than one period. - Initial cost includes purchase price, installation costs, and borrowing costs if criteria are met. - Subsequent costs are capitalized if they improve capacity but not if for maintenance. - PPE can be measured using cost or revaluation models.

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    IAS 16

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    IAS 16 provides guidance on accounting for property, plant, and equipment (PPE). Key points include: - PPE is recognized if it is held for use in production/rental/admin and is expected to be used for more than one period. - Initial cost includes purchase price, installation costs, and borrowing costs if criteria are met. - Subsequent costs are capitalized if they improve capacity but not if for maintenance. - PPE can be measured using cost or revaluation models.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    347 views26 pages

    Ias 16

    Uploaded by

    Niharika Mishra
    IAS 16 provides guidance on accounting for property, plant, and equipment (PPE). Key points include: - PPE is recognized if it is held for use in production/rental/admin and is expected to be used for more than one period. - Initial cost includes purchase price, installation costs, and borrowing costs if criteria are met. - Subsequent costs are capitalized if they improve capacity but not if for maintenance. - PPE can be measured using cost or revaluation models.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 26

    IAS 16

    Property, Plant & Equipment

    PPE Recognition

    Tangible Assets that are held in use of production, for rentals to others ,or for administrative purposes and which are expected to be used for more than one accounting period. Tangible Assets which will probably generate future economic benefits and the cost of the item can be measured are recognized as assets.

    PPE Recognition

    Example: Items of Property Plant & Machinery Safety/ Environmental Equipment

    Elements of Cost

    Purchase Price Cost directly attributable for installation. Borrowing cost if they comply with requirements of IAS 23. Initial estimate of cost of dismantling.

    If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period of credit.

    Cost

    If the asset is acquired by the entity at the amount initially recognized in accordance with any other standard of IFRSs like IFRS -2 Share based payments under Cash settled share based payments or Equity based share based payments.

    Capitalization of Subsequent Cost

    Capital Expenditure is one which improves the earning capacity of the asset or it can last for longer time. Revenue Expenditure is one which maintains the existing capacity of the asset.

    Comprehensive Components Approach

    Each part of an item of PPE with the cost that is significant in relation to the total cost of item should be depreciated separately. If two or more significant parts of an item have same useful life and the depreciation method of this parts may be grouped together to determine the depreciation.
    IAS-16 mandates component accounting

    Non recurring replacement

    If the replacement meets the recognition criteria the cost of new part is added and the cost if old parts deleted from the asset.

    Measurement after Recognition

    An entity can select any accounting policy from either. Cost Model. Revaluation Model.

    Cost v/s Revaluation Model


    Cost Model Revaluation Model

    Componentization

    Componentization

    Useful Life

    Useful Life

    Cost Model

    After recognition as an asset an item of PPE should be carried at its cost less any accumulated depreciation and impairment losses.

    P P& E -Definitions

    Carrying Amount It is the amount at which an asset is recognized after deducting any accumulated depreciation and accumulated amortization losses. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

    P P & E -Definitions

    Recoverable amount is the higher of the of an assets net selling price and its value in use. Depreciation is based on useful life.

    Entity Specific Value

    This value is the present value of cash flows and entity expects to arise from continuous use of an asset and from its disposal at the end of its useful life. Recoverable amount is the higher of an assets net selling price and its value in use.

    Revaluation Model Highlights

    The item of PPE shall be carried at revalued amount and the value to be adopted shall be the fair value at the date of valuation. Revaluations should be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

    Revaluation Model Highlights

    An item of property, plant and equipment is to be revalued for entire class to which the asset belongs revalued.

    Revaluation Model Highlights


    If an asset's carrying amount is increased as a result of a revaluation the increase: a) Has to be recognized in Revenue to the extent that it reverses a revaluation decrease of the same asset previously recognized as an expense; or b) in all other circumstances, credited directly to equity under the heading of revaluation surplus.

    Revaluation Model Highlights

    If an asset's carrying amount is decreased as a result of a revaluation the decrease: a) debited directly to equity under the heading revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset; or b) in all other circumstances, recognized as an expense in revenue.

    Government Grant

    Income approach
    The grant is treated as income and spread over the period over which depreciation on asset is charged

    Government Grant

    Capital Approach
    Under this approach the amount of grant is directly taken in equity Any one approach is allowed under IFRS but income approach finds more suitability.

    Grants - Assets
    1.
    2.

    Reduce from asset Deferred Income

    Withdrawal of Grants

    1. Increase the carrying Value or 2. Decrease the deferred Income

    De-recognition

    The carrying amount of PPE should be derecognized on disposal or when no future economic benefit is expected out of asset. The resultant gain should be included in the other income and loss should be recognized in revenue.

    Disclosures

    The entity should disclose the measurement basis, useful lives, depreciation method and a reconciliation of opening and closing balances detailing out recognition and de recognition ,etc. Disclose the amounts of PPE pledged as security for liabilities.

    Disclosures

    For PPE stated at revalued amounts, disclose: (a) the effective date of the revaluation; (b) whether an independent valuer was involved; (c) the methods and significant assumptions applied in estimating the items fair values

    Disclosures

    For borrowing costs disclose The amount of borrowing costs capitalized during the period; and the capitalization rate used to determine the amount of borrowing costs eligible for capitalization.

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