AS 10

Accounting Standard (AS) 10 Property, Plant & Equipment applies in

the accounting of property, plant, and equipment except in cases when
another accounting standard requires a different
accounting treatment.

AS 10 do not apply in the following cases

1. Biological assets related to agricultural activities excluding

produce on bearer plants.
2. Wasting assets including mineral rights, expenditure on
exploration and extraction of mineral oil, natural gas and similar
non-regenerative resources.
 Agriculture produce is the harvested product of biological assets
of an entity.
 Bearer plant is a plant which is used in the production and supply
of agriculture produce.

Following are not bearer plants: –

1. Plants cultivated to be harvested as agriculture produce.

2. Annual crops like wheat, maize etc
 Biological assets are living animals or plants.

Cost of an asset should be recognized only if it is probable that the

future economic related to such asset will flow to the enterprise and
its cost can be measured reliably.

Cost of an item of property, plant, and equipment comprises of its

purchase price including the import duties and non-refundable taxes
after deducting discounts and rebates. Also, it comprises of costs
incurred in bringing the asset to the location and the cost incurred in
making such asset capable of operating.

Some Important terms in AS 10

The fair value of an asset is the amount at which we can exchange such
an asset between the willing parties in an arm’s length transaction.

An impairment loss is an amount at which the carrying amount of an

asset exceeds its recoverable amount. The recoverable amount of an
asset is the higher of its net selling price and its value in use.

Property plant and equipment are tangible assets. These assets help in
the production or supply of goods and services.

The residual value of an asset is the estimated amount that will be

received at its disposal at the end of its useful life.

The depreciable amount is the cost of an asset reduced by its residual

value. Every significant item of property, plant, and equipment should
be depreciated separately. For Example – it may be appropriate to
depreciate the airframe and engines of such aircraft to depreciate
separately.

Recognize the depreciation charge for each period in the statement of

profit and loss. Allocate the depreciable amount of an asset on a
systematic basis over the useful life of such an asset.

Also, review the useful life of an asset and its residual value at least at
the end of each financial year.
Class of property, plant, and equipment is the grouping of assets of a
similar nature.

Some of the separate classes are as below

1. Land
2. Land & building
3. Machinery
4. Ships
5. Aircrafts
6. Motor vehicles
7. Furniture and fixtures
8. Office equipment
9. Bearer plants
There are different types of depreciation methods which an entity can
adopt for charging depreciation on an asset like straight-line method,
diminishing balance method, units of production method.

We shall derecognize the carrying amount of an item of property, plant,

and equipment in the following cases: –

1. On disposal of an asset
2. When no more future economic benefits are expected from the use
of such asset or disposal of the asset.
Transfer the gain or loss arising due to de-recognition of such item of
property, plant, and equipment to the statement of profit and loss on its
de-recognition.

Financial statements of an entity shall disclose the following

1. Measurement basis used in determining the carrying amount
2. Depreciation methods used
3. Useful lives of assets and depreciation rates.
4. Accumulated depreciation at the beginning and end of the financial
period
5. Changes in the method of depreciation
6. Additions
7. Assets retired from use
8. Assets disposed
9. Impairment loss
Financial statement shall also disclose the following

1. Contractual commitments for the acquisition of property, plant, and

equipment.
2. Amount of expenditure recognized in the carrying amount of
property, plant, and equipment.
3. Amount of assets held for disposal
On the revaluation of property, plant, and equipment disclose the
following: –

1. The effective date of revaluation

2. Whether an independent valuer was involved
3. Method and assumptions applied
4. Revaluation surplus