Which of the following is covered by IAS 16 property, plant, and equipment?
International Accounting Standard 16 Property, Plant and Equipment or IAS 16 is an international financial reporting standard adopted by the International Accounting Standards Board (IASB). It concerns accounting for property, plant and equipment (known more generally as fixed assets), including recognition, determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them.[1] Show
IAS 16 was issued in December 1993 by the International Accounting Standards Committee, the predecessor to the IASB. It was reissued in December 2003 and has been amended multiple times, most recently in 30 June 2014.[1] Overview[edit]IAS 16 applies to property, plant and equipment (PPE). The standard itself defines PPE as "tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and are expected to be used during more than one [accounting] period."[2] The standard does not apply to assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and assets which require more specialised accounting, such as biological (IAS 41 Agriculture), exploration and evaluation assets (IFRS 6 Exploration for and Evaluation of Mineral Resources), mineral rights and reserves such as oil, natural gas and similar non-regenerative resources.[3] Recognition and measurement[edit]IAS 16 prescribes that an item of property, plant and equipment should be recognised (capitalised) as an asset if it is probable that the future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably.[4] Future economic benefits occur when the risks and rewards of the asset's ownership have passed to the entity.[5] The standard also discusses the accounting treatment of parts of property, plant and equipment which may require replacement at regular intervals and the capitalisation of inspection costs.[1] Items of property, plant and equipment should be measured at cost,[6] which includes its original purchase price, any costs necessary to bring the asset to the location and condition for its intended use (e.g. site preparation, delivery and handling, installation, related professional fees for architects and engineers), and the estimated cost of dismantling and removing the asset and restoring the site.[1] Measurement after recognition[edit]IAS 16 permits two accounting models for measurement of the asset in periods subsequent to its recognition, namely the cost model and the revaluation model.[7]
Depreciation: The depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset's useful life. That is, the mark-down in value of the asset should be recognised as an expense in the income statement every accounting period throughout the asset's useful life.[1] The useful life of the asset is determined by taking into account expected usage, physical wear and tear, technical or commercial obsolescence arising from changes in production or market demand and legal limits on its use.[10] In addition, the depreciation in each accounting period of the asset's useful life should reflect the pattern which the asset's economic benefits are expected to be consumed by the entity.[1] Derecognition[edit]Items of property, plant and equipment are derecognised on disposal or when no future economic benefit is expected from its use.[11] An entity should recognise any gain or loss on disposal in its income statement. The gain or loss on disposal is the difference between the proceeds received in exchange for the asset disposed and the carrying amount at the time of disposal.[1][12] Disclosure[edit]IAS 16 requires an entity to disclose in its financial statements for each class of property, plant and equipment:[1]
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Which of the following is covered by Ind AS 16 property, plant and equipment?Items such as spare parts, stand-by equipment and servicing equipment are recognized in accordance with this Ind AS when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory.
What is included in property, plant and equipment?Property, plant, and equipment (PP&E) are a company's physical or tangible long-term assets that typically have a life of more than one year. Examples of PP&E include buildings, machinery, land, office equipment, furniture, and vehicles. Companies list their net PP&E on their financial statements.
Which of the following should be Recognised as an asset under IAS 16 property, plant and equipment?IAS 16 states that the cost of an item of property, plant and 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.
Which of the following is are excluded from the scope of IAS 16?Mineral rights and exploration and evaluation assets are specifically excluded from the scope of PPE.
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