Property, Plant

and Equipment
Chapter 23
 Definition
Property, plant and equipment are tangible
assets that are held for use in production or
supply of goods or services, for rental to
others, or for administrative purposes, and
are expected to be used during more than
one period.
 Measurement
Initial – cost

Subsequent – either:
a. Cost model; or
b. Revaluation model
Different modes of acquisition
 Cash basis
Cost shall be equal to the cash price
equivalent at the recognition date.
(Cash paid + directly attributable cost)
 On Account
Cost shall be equal to the invoice
price minus the discount, regardless
of whether taken or not.
- gross method
- net method
 On Installment Basis
Cost shall be equal to the cash price
equivalent.

If cash price is not available, cost shall

be equal to the present value of all
payments using an implied interest
rate.
 Issuance of Share Capital
In the order of priority:
1. Fair value of property received
2. Fair value of the shares issued
3. Par value or stated value of the
shares issued
 Issuance of Bonds Payable
In the order of priority:
1. Fair value of bonds payable
2. Fair value of asset received
3. Face amount of bonds payable
 Exchange
With commercial substance:
a. Fair value of asset given plus cash
payment – on the part of the payor
b. Fair value of asset given minus cash
received – on the part of the recipient

Without commercial substance

- Carrying amount
 Trade-In
Trade-in is a form of exchange with
commercial substance.

In the order of priority:

a. Fair value of asset given plus cash
payment
b. Trade-in value of asset given plus
cash payment (fair value of the asset
received)
 Donation
Received from shareholders
- Fair value (with credit to donated
capital).

Received from nonshareholders

- Fair value when received or
receivable (credit to donated income)
 Construction
Cost shall be equal to the total cost of
construction (DM+DL+OH)

Any savings or loss on construction

shall not be recognized.
 Derecognition
The carrying amount of an item of PPE
shall be derecognize on disposal or
when no future economic benefits are
expected from the use or disposal.

Any gain or loss on derecognition shall

be included in the P/L.
Fully Depreciated Property
Carrying amount is zero or equal to
residual value.

Assets that are fully depreciated but

are still in service shall not be
derecognized.
 Property held for sale
Not reported as part of PPE, but
presented separately as part of
current asset.

Not subject to depreciation.

Idle or Abandoned Property
Not classified as held for sale.

Temporary idle – still subject to

depreciation