IAS 16 plant, property and Equipment

 

IAS 16: PLANT, Property and Equipment

IAS 16 is standard to presecribe the accounting treatment for property, plant and equipment hence users of the financial statements can use information about an entity's investment in its property, plant and equipment and the changes in such investment.

The principle issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation chargres are to be recognized.

1. Property, plant and equipment are tangible
2. Cost of an item of property, plant and equipment shall be recognized as an asset
3. Cost of property, plant and equipment includes:

• Purchase price
• Import duties
• Non-refunable purchases taxes, after deducting trade Discounts and rebates.
• Cost incurred to bring it to the point of allocation

Measurement after recognition:

Plant , property and equipment can be measured from any one of the following models

1. Cost Model
2. Revaluation Model

Cost Model

Cost model is that plant, property and equipment shall be carried at its cost less accomulated depreciation and any accumulated impairment losses

Revaluation Model

Under the revaluation model, revaluations should be carried out regulary, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date [IAS16.31]

If an item is revalued, the entire class of assets to which that asset belongs should be revalued [IAS16.36]

Depreciation

It is systematic allocation of the depreciable amount of an asset over its useful life.

1. The depreciation charge for each period shall be recognized in profit or loss unless it is included in the carriying amount of another asset. The depreeiation method used shall reflect that pattern in which the asset's future economic benefits are expected to be consumed by the entity.
2. The resdual value of an asset is the estimated amount that an entity would currently oabtain from disposal of the asset, after deducting the esimated costs of disposal, if the asset were already of the age and in the condition expected at  the end of its useful life

Disclosure

For each class of property, plant and equipment disclose [IAS 16.73]

Basis for measuring carring amount 

Depreciation methods used useful lives or depreciation rates gross carrying amount and accumulated depreciation and impairment losses