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Ias 16

The document outlines the IAS 16 standard for Property, Plant, and Equipment (PPE), defining it as tangible non-current assets held for use that provide future economic benefits. It details recognition criteria, initial measurement, and measurement models (cost and revaluation), emphasizing the importance of reliable measurement for asset valuation. Additionally, it addresses comparability issues and methods of depreciation applicable to PPE.

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5 views2 pages

Ias 16

The document outlines the IAS 16 standard for Property, Plant, and Equipment (PPE), defining it as tangible non-current assets held for use that provide future economic benefits. It details recognition criteria, initial measurement, and measurement models (cost and revaluation), emphasizing the importance of reliable measurement for asset valuation. Additionally, it addresses comparability issues and methods of depreciation applicable to PPE.

Uploaded by

sameernasir899
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SBR REVISION

IAS 16 PROPERTY PLANT AND EQUIPMENT :

1) DEFINITION :
TANGIBLE , NON CURRENT ASSET HELD FOR USE OR A TANGIBLE
NON CURRENT ASSET WHOSE EXISTENCE IS RESULTING FROM PAST
EVENTS DONE BY ENTITY TO GAIN FUTURE ECONOMIC BENEFITS.
ALL INCOME AND EXPENSES INCURRED RELATED TO AN ASSET
COME UNDR THE OPERATING ACTIVITIES HEAD IN P/L.
ONLY THOSE ASSETS INCOME AND EXP IS RECORDED IN
INVESGTING ACTIVITIES HEAD WHICH ARE BOUGHT FOR CAPITAL
APPRECIATION OR RENTING OUT.

2) RECOGNITION CRITERIA :
FOR AN ASSET TO BE RECOGNIZED IT MUST FULFILL 2 CONDITIONS ,
A) IT MUST FULFILL THE DEFINITION OF PPE
B) THE COST OR FAIR VALUE CAN BE RELIABLY MEASURED
C) PROBABLE FUTURE BENEFITS WILL BE RECIEVED

3) INITIAL MEASUREMENT :
INITIAL LIST PRICE XX
(LESS) TRADE DISCOUNTS XX
(ADD) IMPORT DUTY TAX XX
(ADD) UNREFUNDABLE TAXES XX
(ADD) HANDLING COST XX
(ADD) DELIVERY COST XX
(ADD) SITE PREPARATION COST XX
(ADD) DECOMMISIONING PROVISION XX
WHEN THE ASSET IS BEING BUILT OR PLANTED SOME AREA WILL BE
DAMAGED AND WHEN THE WOKR TO BE TAKEN FROM THE ASSET IS
COMPLETED THE AREA MUJST BE RESTORED WHICH IS CALLED
DECOMMISIONING. A PROV. IS CREATED ON EXPECTED VALUE AFTER
YEARS AND THEN F.V OF THE EXPECTED VALUE IS TAKEN AND IS
CAPITALIZED IN ASSETS COST AND THE PROVISION KEEPS
INCREASING EVERY YEAR.

4) MEASUREMENT CRITERIA :
ASSET IS RECOGNIZED AT COST OR REVALUATION MODEL
COST MODEL IS THE MODEL IN WHICH ASSET IS RECOGNIZED AT
THE HISTORIC COST AND F.V OR M.V OF ASSET IS IGNORED.

COST OF ASSET XX
(LESS ) ACC. DEPRECIATION XX
(LESS) ACC. IMPAIRMENT LOSS XX
REVALUATION MODEL IS THE MODEL IN WHICH ASSETS IS
REVALULED REGULARLY TO F.V OR M.V OF ASSET. CONDITION FOR
REVAL. MODEL IS F.V MUST BE AVAILABLE TO BE RELIABLY
MEASURED AND IS REGULARLY UPDATED.
F.V OF ASSET XX
(LESS) SUBSEQUENT ACC. DEP XX
(LESS) SUBSEQUENT ACC. IMP.LOSS XX

5) COMPARABILITY ISSUE :
INORDER TO AVOID COMPARABILITY ISSUES THE ASSET WHICH IS
RECORDED AT REVALUATION MODEL SHOULD GOVE ITS VALUE IN
COST MODEL AS WELL AND THE ASSETS RECORDED AT COST
MODEL SHOULD GIVE ITS VALUE IN REVALUATION MODEL AS WELL.
SO THAT IT CANBE COMPARE WITH OTHER ENTITIES.

6) DEPRECIATION :
DEP. IS CHARGED ON USEFUL LIFE OF THE ASSETS. ITS THE WEAR
AND TEAR OF ASSETS. ITS CHARGED IN P/L UNDER OPERTAING
ACTIVITIES. IT CAN BE CHARGED BY 3 METHODS ,
A) STRAIGHT LINE METHOD
B) REDUCING BALANCE METHOD
C) MACHINE HOURS METHOD

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