IAS 16

Property, Plant and Equipment

Presented By :
Snehasish Barua, FCA
IAS 16 does not apply to
 Assets classified as held for sale (IFRS 5)

 Exploration and evaluation of mineral rights (IFRS 6)

 Biological assets relating to agricultural activity (IAS 41)

Recognize PPE if
 It can be measured reliably.

 It is probable that future economic benefit will flow to

the entity
Initial measurement is at cost which includes
 Purchase price

 Any other costs incurred in bringing the asset into

working condition
PPE should be depreciated:
 Write off the cost less any residual value over the
useful economic life (UEL)

 Choose a depreciation method to match the flow of

economic benefit

 Review the method, residual value and UEL at year

end, and revise if necessary

 Any changes will be regarded as a change in an

accounting estimate.
Subsequent measurement
 Can choose to revalue PPE, it is not mandatory
 If do choose to revalue, must revalue all assets in the same class

 Regular revaluations are required to ensure the asset is reflected at current market value

 Any upwards revaluation will be recognized as a revaluation surplus and shown as other
comprehensive income (unless there had been a previous downwards revaluation, in
which case the subsequent increase can be shown in the income statement)

 Any downwards revaluation will be recognized immediately in the income statement

(unless there has been a previous upwards revaluation, in which case the subsequent
decrease can be deducted from the revaluation surplus).
 Test your knowledge
a) B Ltd has an item of land carried in its books of Tk 13,000. Two years ago a slump in land values
led the company to reduce the carrying value from Tk 15,000. This was expensed in the income
statement. There has been a surge in land prices in the current year and the land is now worth Tk
20,000.

b) As above except now assume original cost was Tk 15,000, it was revalued to Tk 20,000 and has
now fallen to Tk 13,000.

c) C Ltd bought an asset for Tk 10,000 at the beginning of 2016. UEL was five years. On 1 January
2018 the asset was revalued to Tk 12,000. The remaining UEL is 3 years.

Requirement

a) Account for the revaluation in the current year

b) Account for the decrease in value
c) Account for the revaluation and state the treatment for depreciation from 2018 onwards.
CONTACT DETAILS

SNEHASISH BARUA, FCA (ICAB), ACA (ICAEW)

PARTNER
SNEHASISH MAHMUD & CO
CHARTERED ACCOUNTANTS
+8801819319319
SNEHASISH@SMAC-BD.COM
WWW.SMAC-BD.COM