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outlines the accounting treatment for most types of property, plant and…
outlines the accounting treatment for most types of property, plant and equipment. Property, plant and equipment is initially measured at its cost, subsequently measured either using a cost or revaluation model, and depreciated so that its depreciable amount is allocated on a systematic basis over its useful life.
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initial measurement
item of property, plant and equipment should initially be recorded at cost;
cost includes all costs necessary to bring the asset to working condition for its intended use (site preparation, delivery and handling, installation, related professional fees, estimated cost of dismantling and removing the asset and restoring the site)
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depreciation
depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset's useful life;
residual value and the useful life of an asset should be reviewed at least at each financial year-end;
depreciation should be charged to profit or loss, unless it is included in the carrying amount of another asset;
depreciation begins when the asset is available for use and continues until the asset is derecognised, even if it is idle
recoverability
item of property, plant, or equipment shall not be carried at more than recoverable amount;
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PPE requires impairment testing and, if necessary, recognition for property, plant, and equipment;
derecognition
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if an entity rents some assets and then ceases to rent them, the assets should be transferred to inventories at their carrying amounts
asset should be removed from the statement of FP on disposal or when no future economic benefits are expected from its disposal;
IAS 16. Property, Plant and Equipment