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IAS 16: Property, plant and equipment

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Accounting for property, plant and equipment

Standard IAS 16 prescribes the accounting treatment for property, plant and equipment and therefore it is one of the most important and commonly applied standards. IAS 16 states that the cost of an item of property, plant and equipment shall be recognized as an asset if, and only if:. Some items of property, plant and equipment might be necessary to acquire for safety or environmental reasons. Although they do not directly increase the future economic benefits, they might be inevitable to obtain future economic benefits from other assets and therefore, should be recognized as an asset. However, some parts of the item of property, plant and equipment may require replacement at regular intervals, for example, aircraft interiors. In such a case, an entity derecognizes carrying amount of older part and recognizes the cost of new part into the carrying amount of the item.

Stay up-to-date with the latest Coronavirus news: Sign up for daily news alerts. The accounting standard IAS 16 sets out how entities should report their investment in property, plant and equipment. Find articles, books and online resources providing quick links to the standard, summaries, guidance and news of recent developments. Free registration is required. This unaccompanied version does not include additional content that accompanies the full standard, such as illustrative examples, implementation guidance and bases for conclusions.

Stay up-to-date with the latest Coronavirus news: Sign up for daily news alerts. IAS 16 Property, Plant and Equipment sets out the requirements for the recognition of the assets, the determination of their carrying amounts, and the depreciation charges and impairment losses in relation to them. Revised December Effective 1 January Find out more on which entities qualify and the criteria to be met. Financial Reporting Faculty members get full access. Not EU endorsed as at 21 January


For example, IAS 17 Leases requires an entity to evaluate its recognition of an item of leased property, plant and equipment on the basis of the transfer of risks and.


IAS 16 Property, Plant and Equipment – summary

IAS 16 Property, Plant and Equipment outlines the accounting treatment for most types of property, plant and equipment. Property, plant and equipment is initially measured at its cost, subsequently measured either using a cost or revaluation model, and depreciated so that its depreciable amount is allocated on a systematic basis over its useful life. IAS 16 was reissued in December and applies to annual periods beginning on or after 1 January 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.

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15 – Property, Plant and Equipment

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You can almost guarantee that in every exam you will be required to account for property, plant and equipment at least once. There are essentially four key areas when accounting for property, plant and equipment that you must ensure that you are familiar with:. The basic principle of IAS 16 is that items of property, plant and equipment that qualify for recognition should initially be measured at cost. One of the easiest ways to remember this is that you should capitalise all costs to bring an asset to its present location and condition for its intended use.

IAS 16 Property, Plant and Equipment

The objective of IAS 16 property plant and equipment PPE is to prescribe the accounting treatment for property, plant and equipment. The principal issue is the timing of recognition of assets, the determination of their carrying amounts, and the depreciation charges to be recognized in relation to them. The following is the IAS 16 summary. Items of property, plant and equipment should be recognized as assets when:. Cost includes all costs necessary to bring the asset to working condition for its intended use.

IAS 16 Property, Plant and Equipment
1 Response
  1. Amaury P.

    About. IAS 16 establishes principles for recognising property, plant and equipment as assets, measuring their carrying amounts, and measuring the depreciation.

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