Ind AS 16: Property, Plant and Equipment#
Initial Recognition#
An item of PPE is recognized if:
- It is probable that future economic benefits will flow to the entity
- The cost of the item can be measured reliably
Cost includes:#
- Purchase price (including import duties, non-refundable taxes)
- Directly attributable costs of bringing asset to working condition
- Initial estimate of costs of dismantling and removing the item
Exclusions:#
- Costs of day-to-day servicing (repairs and maintenance)
- Replacement parts (if not separable)
- Construction overheads (unless attributable to construction)
Subsequent Measurement#
Cost Model#
- Carried at cost less accumulated depreciation and impairment losses
- Depreciation calculated on depreciable amount
Revaluation Model#
- Fair value at revaluation date less subsequent depreciation
- Revaluations made with sufficient regularity
- Revaluation surplus credited to OCI
Depreciation#
Depreciable Amount#
Depreciable Amount = Cost - Residual Value
Methods:#
| Method | Use Case |
|---|---|
| Straight-line | Consistent usage |
| Diminishing balance | Higher initial depreciation |
| Units of production | Based on usage |
Useful Life Considerations#
- Physical wear and tear
- Technical or commercial obsolescence
- Legal or contractual limits
Component Accounting#
- Major parts with different useful lives depreciated separately
- Small items grouped for depreciation
Derecognition#
An item of PPE is derecognized when:
- No future economic benefits expected
- Disposed or scrapped
- Fully depreciated but still in use (remove from financial statements)
Gain/Loss on Disposal#
- Recognized in Profit or Loss
- Calculated as proceeds less carrying amount
Disclosure Requirements#
- Gross carrying amount and accumulated depreciation
- Reconciliation of carrying amount at beginning and end
- Existence and amounts of restrictions
- Expenditure on account of PPE in course of construction
- Compensation from third parties for items impaired