IAS 16 Property Plant And Equipment Archives – FAQ | IFRS

IAS 16 Objective Scope Definitions

Objective

1 The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about an entity’s investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them.

Scope

2 This Standard shall be applied in accounting for property, plant and equipment except when another Standard requires or permits a different accounting treatment.

3 This Standard does not apply to:

  1. property, plant and equipment classified as held for
Read more

IAS 16 Recognition

7 The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:

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

8 Items such as spare parts, stand-by equipment and servicing equipment are recognised in accordance with this IFRS when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory.

9 This Standard does not prescribe the unit of measure for recognition, ie what constitutes an item of property, plant and equipment. Thus, judgement is required in applying the recognition criteria to an entity’s specific circumstances. It may … Read more

IAS 16 Measurement at recognition

15 An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost.

Elements of cost

16 The cost of an item of property, plant and equipment comprises:

  1. its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
  2. 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.
  3. the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used
Read more

IAS 16 Measurement after recognition

29 An entity shall choose either the cost model in paragraph 30 or the revaluation model in paragraph 31 as its accounting policy and shall apply that policy to an entire class of property, plant and equipment.

29A Some entities operate, either internally or externally, an investment fund that provides investors with benefits determined by units in the fund. Similarly, some entities issue groups of insurance contracts with direct participation features and hold the underlying items. Some such funds or underlying items include owner-occupied property. The entity applies IAS 16 to owner-occupied properties that are included in such a fund or are underlying items. Despite paragraph 29, the entity may elect to measure such properties using the fair value model … Read more

IAS 16 Derecognition

67 The carrying amount of an item of property, plant and equipment shall be derecognised:

  1. on disposal; or
  2. when no future economic benefits are expected from its use or disposal.

68 The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised (unless IFRS 16 Leases requires otherwise on a sale and leaseback). Gains shall not be classified as revenue.

68A However, an entity that, in the course of its ordinary activities, routinely sells items of property, plant and equipment that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be … Read more

IAS 16 Disclosure

73 The financial statements shall disclose, for each class of property, plant and equipment:

  1. the measurement bases used for determining the gross carrying amount;
  2. the depreciation methods used;
  3. the useful lives or the depreciation rates used;
  4. the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; and
  5. a reconciliation of the carrying amount at the beginning and end of the period showing:
    1. additions;
    2. assets classified as held for sale or included in a disposal group classified as held for sale in accordance with IFRS 5 and other disposals;
    3. acquisitions through business combinations;
    4. increases or decreases resulting from revaluations under paragraphs 31, 39 and 40 and from impairment losses recognised
Read more