Property, Plant and

Equipment (PAS 16)

Definition:
1. Property, Plant and Equipment are tangible assets that:
 Are held for use in the production or supply of goods and services, for rental to others,
or for administrative purposes; and
 Are expected to be used for more than one year.

2. Carrying Amount
 Is the amount at which an asset is recognized after deducting any accumulated
depreciation and accumulated impairment losses

3. Depreciation
 Is systematic allocation of the depreciable amount of assets over its useful life
Definition:
4. Depreciable amount
 Is the cost of an asset less its residual value

5. Residual value
 Is the estimated amount that an entity can obtain when disposing of an asset after its
useful life has ended. The estimated cost of disposing the asset should be deducted.
Initial Recognition

PPE are recognized if

a. It is probable that future economic benefits associated with the
item will flow to the entity; and
b. The cost of the item can be measured reliably.
Measurement
1. Initial Measurement
 At cost ( which is the amount of cash/cash equivalents paid and the FV of the
other considerations given to acquire the asset at the time of acquisition/
construction)

2. Subsequent Measurement
 Cost model/ at carrying value ( cost- accumulated depreciation and any
accumulated impairment loss)
 Revaluation Model/ at revalued amount ( Fair value at the date of revaluation
– subsequent accumulated depreciation and any accumulated impairment loss)
Elements of cost:
1. Purchase Price- amount paid including import duties & nonrefundable purchase
taxes, net of trade discounts and rebates

2. Directly Attributable Costs- cost necessary in bringing the asset to its location
and condition necessary for its intended use such as:
 Cost of employee benefits directly attributable from the acquisition/ construction of the
PPE
 Cost of site preparation
 Initial delivery and handling cost
 Installation and assembly cost
 Professional Fees
 Cost of testing net of any proceeds from selling the samples
Elements of cost:
3. Initial estimate of the cost of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs. (present
obligations exist)