Property, Plant & Equipment

In: Business and Management

Submitted By probir77
Words 1283
Pages 6
Objective
The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are: the timing of recognition of asset; the determination of their carrying amounts; and The depreciation charges to be recognized.

Scope
IAS-16 applied to all Property, Plant & Equipment until and unless any other standard requires or permits a different accounting treatment.

Definition
Property, Plant & Equipment are tangible items that: are held for use in the production or supply of goods or services; for rental to others; for administrative purposes; and are expected to be used during more than one period.

Recognition
The cost of an item or Property, Plant & Equipment shall be recognized as an asset if, and only if: it is probable that future economic benefits associated with the item will flow to the entity; and The cost of the item can be measured reliably.

Measurement at Recognition
An item of Property, Plant & Equipment that qualifies for recognition as an asset shall be measured at its cost.

Elements of Cost
Purchase price + (Import duties + Non refundable taxes) - (Trade Discounts + Rebates) Directly attributable costs. Initial estimate of the cost of dismantling and removing the item and restoring the site in which it is located.

Costs that are not Costs of Property, Plant & Equipment
Costs of opening new facility; Costs of introducing new product or service; Costs of conducting business in new location or with new class of customer; Administration and other general overhead costs; Costs incurred in using or redeploying an item; Amounts related to certain incidental operations.

Examples of Directly Attributable Costs
Cost of employee benefits. Cost of site preparation. Initial delivery and handling cost. Installation and assembly cost. Cost of testing after deducting the net proceeds from…...

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