PROPERTY, PLANT AND EQUIPMENT

PAS 16
1. It is TANGIBLE ASSETS
Meaning items of PPE have physical substance
2. They are USED IN NORMAL OPERATION
Meaning items of PPE are used in the production or supply and goods or services, for rental, or
for administrative purposes.
3. They are LONG-TERM IN NATURE
Items of PPE are expected to be used from more than a year
Classes of PPE:
A. Land
B. Land and Buildings
C. Machinery
D. Ships
E. Aircraft
F. Motor vehicles
G. Furniture and fixtures
H. Office equipment
I. Bearer plants
Does not apply to:

 Classified as held for sale (PFRS5)

 Biological asset, other than bearer plants (PAS 41)
 Exploration and evaluation assets (PFRS 6)
 Mineral rights and reserves
 Land held for undetermined use or for capital appreciation (PAS 40)
 Land by real estate developer held for sale in the normal course of business (PAS 2)

RECOGNITION AND DERECOGNITION PPE ITEMS

 The cost of an item of property, plant and equipment shall be recognized as an asset
only if:
  It is probable that future economic benefits associated with the item will
flow to entry; and
 The cost of the item can be measured reliably.
 The carrying amount of an item of property, plant and equipment shall be derecognized:
 on disposal; or (example when you sell your asset or when you dispose them
then you need to recognize your PPE)
 When no future economic benefits are expected from its use or disposal.

MEASUREMENT OF PROPERTY, PLANT AND EQUIPMENT

Initially PPE should be measured AT COST and subsequently it should be measured USING THE
COST OR REVELUATION MODEL.

INITIAL COST
PURCHASE PRICE

 Invoice Price
 Import duties (so when you import your pp item from abroad there are import duties and it
should be included in the cost of the PPE)
 Non-refundable purchase taxes ( vat or value added tax is a refundable purchase tax that
why vat is not included in the cost of PPE)
 Minus trade discounts and rebates ( if there is trade discount for short-term financing and if
there are rebates so we deduct them
DIRECTLY ATTRIBUTABLE COST
This are cost necessary to bring the asset to the location and condition intended by
management (included here are freight or shipping costs, insurance during shipping maybe
even cost of testing)
COST OF DISMANTLING
This are the costs for dismantling and removing the item and restoring the site on which it is
located (for this cost we estimate this because this is a future cost. Estimate should normally we
get the present value and corresponding liability is credited for this cost but the estimated
dismantling cost is capitalized in the initial cost of PPE)