Section 3200: Property, Plant and Equipment
International Accounting Standard 16
Property, Plant and Equipment
1. First version of IAS 16
"Accounting for property, plant and equipment" issued in March 1982
2. Revisions
December 1993, Property, plant and equipment
December 2003, Property, plant and equipment
[U.S. GAAP Codification Topic]
360 Property, plant, and equipment
3. Measurement at initial recognition, IAS 16.29
Property, plant and equipment are measured at cost
--> at the time of initial recognition
Measurement after recognition: Choice of (1) or (2)
(1) cost model
(2) revaluation model
Revaluation model
[IAS 16.29] Choice of cost model or revaluation model.
[ASC 360] Revaluation model is not allowed.
4. Cost Model
Carrying amount = cost - (1) - (2)
(1) accumulated depreciation
(2) accumulated impairment losses
5. Revaluation Model
Revalued amount = (1) - (2) - (3)
(1) fair value at revaluation date
(2) subsequent accumulated depreciation
(3) subsequent accumulated impairment losses
6. Revaluation Surplus
Increase in carrying amount after a revaluation
(1) Revaluation surplus is recognised, in other comprehensive income
(2) Revaluation surplus is accumulated, in equity under separate heading
7. If the increase is a reversal of previous decrease
which was recognised in profit or loss,
--> recognise such increase in profit or loss.
8. Decrease in carrying amount after a revaluation
(1) Recognised in profit or loss
(2) If revaluation surplus has credit balance, reduce revaluation surplus, first
9. When the asset is derecognised
--> revaluation surplus in equity is transferred to retained earnings
10. Non-monetary Asset Exchange
General principle:
Cost of PP&E by non-monetary asset exchange is measured at fair value, IAS 16.24
Exceptions:
If (1) or (2) is the case,
carrying amount of asset given up is used to measure the cost of PP&E acquired
(1) exchange lacks commercial substance
(2) fair value is not reliably measurable
11. Exchange has commercial substance, IAS 16.25
if (3) or (4) is the case
(3) the configurations of cash flows are different for assets received and given up
(4) exchange transaction changes entity-specific value of the operation
that is affected by exchange
Configuration of cash flows refers to (a) amount, (b) timing, (c) risk
12. IAS 36, Impairment of assets is applied
--> to measure and recognise an impairment loss
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