n. venkatram level 1+2 1 ias 16 property, plant and equipment prepared prepared by bahaa al ghussin...

Level 1+2Level 1+2 11N. Venkatram

IAS 16IAS 16 Property, Property, Plant and EquipmentPlant and Equipment

preparedprepared By Bahaa Al ghussin Faeq Al alamy

Ahmed Al souerky

Supervision

Yousef al medalal

N. VenkatramN. Venkatram

CONTENTS

OBJECTIVE SCOPE DEFINITIONS RECOGNITION MEASUREMENT AT RECOGNITION Measurement of cost Depreciation Impairment Disclosure


ObjectiveObjective

To prescribe the accounting treatment To prescribe the accounting treatment for PP&Efor PP&E

Principal issuesPrincipal issues– timing of recognition of assetstiming of recognition of assets– determination of carrying amountdetermination of carrying amount– depreciation charges to be recogniseddepreciation charges to be recognised


Scope…Scope…

The Standard applies to all PP&E, except The Standard applies to all PP&E, except where another IAS requires or permits a where another IAS requires or permits a different treatmentdifferent treatment

Does not apply to biological assets Does not apply to biological assets related to agricultural activity or mineral related to agricultural activity or mineral rights and reserves. Does apply to PP&E rights and reserves. Does apply to PP&E used to develop and maintain these used to develop and maintain these assetsassets


DefinitionDefinition

Property, plant and equipment (PP&E) Property, plant and equipment (PP&E) are tangible assets thatare tangible assets that– are held for use in the production or supply are held for use in the production or supply

of goods or services, for rental to others, or of goods or services, for rental to others, or for administrative purposesfor administrative purposes

– are expected to be used during more than are expected to be used during more than one periodone period


RecognitionRecognition

An item of PP&E should be recognised as An item of PP&E should be recognised as an asset whenan asset when– it is probable that future economic benefits it is probable that future economic benefits

associated with asset will flow to the associated with asset will flow to the enterprise; andenterprise; and

– cost of asset to the enterprise can be cost of asset to the enterprise can be measured reliablymeasured reliably


Initial Initial measurementmeasurement

PP&E initially measured at PP&E initially measured at costcost Cost componentsCost components

– purchase pricepurchase price– import duties and purchase taxesimport duties and purchase taxes– directly attributable costs of bringing asset to directly attributable costs of bringing asset to

working condition / useworking condition / use– less: trade discounts & rebatesless: trade discounts & rebates


Examples of directly attributable costs are:

(a) costs of employee benefits (b) costs of site preparation; (c) installation and assembly costs; (d) costs of testing


Subsequent Subsequent expenditureexpenditure

When should subsequent expenditure be When should subsequent expenditure be capitalised?capitalised?– future economic benefits are probablefuture economic benefits are probable

– The purpose of these expenditures is often described as for the ‘repairs and maintenance’ of the item of property, plant and equipment

– For example : aircraft , seats


Subsequent Subsequent measurementmeasurement

Cost modelCost model– cost less accumulated depreciation and cost less accumulated depreciation and

impairment lossesimpairment losses Revaluation modelRevaluation model

– Fair value at date of revaluation less Fair value at date of revaluation less subsequent depreciation, provided fair value subsequent depreciation, provided fair value can be measured reliably.can be measured reliably.


Subsequent Subsequent measurementmeasurement

If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognized in other comprehensive income and accumulated in equity under the heading of revaluation surplus.

If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognized in profit or loss.


DepreciationDepreciation

Depreciation charge Depreciation charge expense expense– unless included in another assetunless included in another asset

The depreciable amount should be The depreciable amount should be allocated on a systematic basis over the allocated on a systematic basis over the asset’s useful lifeasset’s useful life

The residual value and useful life should The residual value and useful life should be reviewed at least annually and be reviewed at least annually and adjusted if necessaryadjusted if necessary


DepreciationDepreciation

Depreciation methodsDepreciation methods– straight-line methodstraight-line method– diminishing balance methoddiminishing balance method– sum-of-the-units sum-of-the-units

Change in depreciation methodChange in depreciation method– change in accounting change in accounting estimateestimate


Impairment lossesImpairment losses

IAS 16 no longer includes the IAS 16 no longer includes the requirements for impairmentrequirements for impairment

Impairment of an item of PP&E should be Impairment of an item of PP&E should be dealt with under IAS 36, Impairment of dealt with under IAS 36, Impairment of AssetsAssets


Disclosure

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

(a) the measurement bases used (b) the depreciation methods (c) the useful lives or the depreciation rates (d) the gross carrying amount and impairment (e) a reconciliation of the carrying amount at the

beginning and end of the period

Level 1+2 16N. Venkatram

THE END

n. venkatram level 1+2 1 ias 16 property, plant and equipment prepared prepared by bahaa al ghussin...

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