IND AS-16

PROPERTY, PLANT AND EQUIPMENT

 Accounting for all property, plant and equipment unless another Standard requires or permits a different
accounting treatment.
 This Ind AS does not apply to: -
1. Property Plant & Equipment classified as held for sale.
2. Biological Assets except Bearer Plants.
3. Exploration and Evaluation Rights of Mineral Resources.
4. Mineral Rights & Mineral Reserves such as oil, natural gas and similar other resources.
 This Ind AS partially applies on: -
1. Leased Assets. (Ind AS-17)
2. Investment Property. (Ind AS-40)

MEANING OF PPE
PPE can be defined as any tangible Asset which is expected to be used for more than one period and is held
for:
 Production of Goods or Rendering of Services
 Administrative Purpose
 Rental purpose.
(*Spare parts, stand-by equipments are recognized as PPE when they meet the above definition of PPE
otherwise as inventory as per Ind AS-2.)
RECOGNITION OF PPE
PPE shall be recognized as an asset in Books of Accounts when:
 Future Economic Benefits are probable to flow to the entity.
 Its cost can be measured reliably

MEASUREMENT OF PPE
1. INITIAL COST
1.1 ACQUIRED PPE
 Initial recognition should be at cost.
 Cost includes: -
(i) Purchase price includes import duties/non-refundable taxes on such purchase after deducting rebates
and trade discounts.
(ii) Directly attributable costs to bring the asset to the Present location and condition.
(iii) Initial estimates of dismantling costs and site Restoration costs.
(iv) Major inspection costs and Cost of replacements.
(** In case of Self Constructed Asset measurement criteria will be same as above but internal profits will not
be included and to include borrowing cost as per Ind AS-23)
1.1 EXCHANGED PPE
CASE-1- WHERE FAIR VALUE OF ASSET OBTAINED CAN BE ESTIMATED AND TRANSACTION
HAS COMMERCIAL SUBSTANCE.

Recorded at Fair Value.

 CASE-2- OTHER THAN ABOVE CASE

PPE is recorded at Book Value of old asset.

2. SUBSEQUENT COST
PPE should be subsequently measured using either Cost Model or Revaluation Model.
 COST MODEL
PPE is recorded as follows:
COST xxx
+ ACCUMULATED DEPRECIATION xxx
+ ACCUMULATED INCOME/LOSSES xxx
xxx
 REVALUATION MODEL
Revaluation is not required frequently. If Fair Value is almost equal to Carrying Amount then it is not required.
Accounting Treatment -
 METHOD-1 RECALCULATION OF COST AND ACCUMULATED DEPRECIATION
Under this percentage change in carrying amount is reflected in cost and accumulated depreciation account.
PPE a/c Dr.
To accumulated depreciation a/c
To Revaluation Reserve A/c
 METHOD-2 CANCELLATION OF ACCUMULATED DEPRECIATION AND THEN REVALUATION IS
DONE
Accumulated Depreciation a/c Dr.
To PPE A/c

PPE a/c Dr.

To Revaluation reserve a/c
 DEPRECIATION
Three methods can be used to calculate Depreciation:
 Straight line method (SLM)
 Written down value method (WDV)
 Units of production

Depreciation should start from the date when asset is ready for use.
Depreciation should cease when asset is:
 Disposed off
 Asset is held for sale under IND AS 105
 Depreciable Value = Cost- Residual value
 If Residual Value of asset > carrying amount then, Depreciation will be zero.

DERECOGNITION
Derecognize the carrying amount:
 On disposal; or
  When no future benefits are expected from its use.
 Any gain or loss arising from the De-recognition to be included in profit or loss.
 Gains (or proceeds) are not classified as revenue.
IMPAIRMENT
 Compensation from third party for items of PPE that were Impaired / Lost / Given up shall be included
in P&L when compensation becomes receivable.
 Impairment of Assets including PPE dealt by IND AS 36.

DISCLOSURE REQUIREMENTS
Ind AS 16 prescribes financial statements should disclose, for every class of PPE:
 Measurement basis for determining carrying amount.
 Depreciation methods used.
 Depreciation rates/ Useful lives of the assets.
 Aggregate carrying amount and accrued depreciation at the start and at the end of period.
 Amount of expenditure recognized in carrying amount of an item of PPE during its construction.
 Amount with respect to contractual commitment for acquisition of PPE.