IAS 16 Property Plant and Equipment.
This Standard deals with the accounting treatment of Property, Plant & Equipment including the guidance for the main issues related to the recognition & measurement, determination of carrying value, depreciation charges, any impairment loss, and derecognition aspects for the property, plant & equipment in the financial statements of an entity.
The requirements of this standard are applicable to the accounting treatment of property, plant, and equipment.
This Standard is not applicable:
(a) To the property, plant, and equipment which are classified as held for sale and are covered under IFRS 5
(b) For the accounting treatment of biological assets related to an agricultural activity which are covered under IAS 41
(c) For the accounting treatment of exploration and evaluation assets and mineral rights and reserves such as oil and gas and other non-regenerative resources which are covered under IFRS 6.
However, IAS 16 is applicable to the property, plant & equipment, which are used to maintain or develop the biological assets under IAS 4 and mineral rights and reserves such as oil and gas and other non-regenerative resources which are covered under IFRS 6.
An entity will de-recognize the asset from the statement of financial position when:
(a) The asset is disposed of:
(b) No economic benefits are expected either from the use or from the sale of the asset
- Any gain or loss on the disposal of assets will be charged to the statement of profit or loss which will be the difference between carrying value and disposal proceeds.
- If the asset is sold on an extended credit period or on a deferred installment basis, then the disposal proceeds will be taken as cash price equivalent and any excess over the cash price will be treated as Interest Income which will be recognized over the period of credit.
For each class of property, plant, and equipment, the entity is required to disclose the following:
(a) The measurement model
(c) Depreciation rate or useful life
(d) A statement reconciling the carrying value at the start of the period to the carrying value at reporting date which includes:
- Any additions and disposals during the year
- Any assets acquired as part of a business combination
- Any impairment loss recognized in the current year
- The depreciation charge for the year
- Assets classified as held for sale under IFRS 5
- Any exchange differences arising on translation of foreign currency assets.
(e) Any expense on the asset during the year which was capitalized as part of the carrying amount of the asset.
(f) Any compensation received from the third parties in respect of any impairment related to the asset.
(h) Any depreciation charges which are recognized as part of the cost of other assets.
(i) Any change in useful life, residual value, or depreciation method related to the property, plant, and equipment.
(j) The entity should disclose the date of revaluation, the involvement of the expert, and the revaluation surplus in respect of the assets which are revalued in the current period.
(k) Carrying values of the assets which are idle.
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