Government Accounting

&
Accounting for non-profit organizations

Jftsantes-presenter
 Chapter 9
Property, Plant and Equipment
Learning Objectives

This Chapter covers accounting for Property, Plant and

Equipment (PPE) which includes land; land improvements;
buildings and other structures; machinery and equipment;
transportation equipment; furniture, fixtures and books;
leasehold improvements; and other PPE including specialist
military equipment, infrastructure assets, and heritage assets.

It also, covers accounting treatment, recognition,

measurement, derecognition to ensure that all PPEs are
properly valued and recorded, and the disclosure
requirements in reporting PPE.
 Definition of terms
Carrying Amount – is the amount at which an asset is
recognized after deducting any accumulated
depreciation and accumulated impairment losses.

Cost – is the amount of cash or cash equivalents paid

and the fair value (FV) of the other consideration given
to acquire an asset at the time of its acquisition or
construction.
 Definition of terms
Depreciation – is the systematic allocation of the
depreciable amount of an asset over its useful life.

Depreciable Amount – is the cost of an asset, or other

amount substituted for cost, less its residual value.

Entity-specific Value – is the present value (PV) of the

cash flows an entity expects to arise from the continuing
use of an asset and from its disposal at the end of its
useful life or expects to incur when settling a liability.
 Definition of terms
Exchange Transactions – are transactions in which one
entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal
value (primarily in the form of cash, goods, services, or
use of assets) to another entity in exchange.

Fair Value – is the amount for which an asset could be

exchanged or a liability settled, between
knowledgeable, willing parties in an arm’s length
transaction.
 Definition of terms
Exchange Transactions – are transactions in which one
entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal
value (primarily in the form of cash, goods, services, or
use of assets) to another entity in exchange.

Non-exchange Transactions – are transaction where an

entity either receives value from another entity without
directly giving approximately equal value in exchange,
or gives value to another entity without directly
receiving approximately equal value in exchange.
 Definition of terms
Residual Value – is the equivalent to at least five
percent (5%) of the cost of an asset that the
entity would currently obtain from disposal of
the asset, after deducting the estimated costs of
disposal, if the asset were already of the age and
in the condition expected at the end of its useful
life, unless a more appropriate percentage is
determined by an entity based on their
operation.
 Definition of terms
• Useful Life – is the period over which an asset is
expected to be available for use by an entity; or the
number of production or similar units expected to
be obtained from the asset by an entity.
(COA Circular 2003-007)
Property, Plant and Equipment
…are:
a. tangible assets;
b. held for use in the production or supply of
goods, services or program outputs, for
rental to others, or for administrative
purposes, and not intended for resale in
the ordinary course of operations; and
c. expected to be used for more than one
reporting period
 Criteria for Recognition
• a. it is probable that the future economic benefits or service
potential associated with the item will flow to the entity;

• b. the cost or fair value of the item can be measured reliably;

• c. beneficial ownership and control clearly rest with the

government;

• d. the asset is used to achieve government objectives; and

• e. it meets the capitalization threshold of P15,000

(NOW P50K)
 Applying the Capitalization
Threshold of P15,000
Items with individual values below the threshold but
which work together in the form of a group of network
asset whose total value exceeds the threshold shall be
recognized as part of the primary PPE.
Example: computer network
 Applying the Capitalization
Threshold of P15,000
Items with individual values below the threshold but which work together in
the form of a group of network asset whose total value exceeds the threshold
shall be recognized as part of the primary PPE.
Example: PABX system (Private Automated Branch Exchange)
 Applying the Capitalization
Threshold of P15,000
Items with individual values below the threshold but which work together in
the form of a group of network asset whose total value exceeds the threshold
shall be recognized as part of the primary PPE.
Example: Sewerage System
 Applying the Capitalization
Threshold of P15,000
• Expenditures incurred on purchasing, developing,
and operating hardware, like web servers, staging
servers, production servers and internet connections
of a website is accounted for as PPE if the total value
of the primary asset (communications networks) and
these items is within the threshold of P15,000 and
above.
 Applying the Capitalization
Threshold of P15,000
• This threshold shall be applied on an individual asset
or per item basis. Each item within the bulk acquisition
with aggregate or total value of PPE, such as library
books, computer peripherals and small items of
equipment, will need to meet the capitalization
threshold to be recognized as PPE.
 Measurement at Recognition.
• PPE that qualifies for recognition as an asset
shall be measured at cost.

• acquired through a non-exchange transaction,

its cost shall be measured at its fair value as at
the date of acquisition.
 Measurement at Recognition.

• The cost of an item of PPE comprises:

a. Purchase price including import duties and non-

refundable purchase taxes, after deducting trade discounts
and rebates

b. Any costs directly attributable to bringing the asset to the

location and condition necessary for it to be capable of
operating in the manner intended by management
b. Any costs directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the
manner intended by management.

• Examples:
• 1. Costs of employee benefits arising directly from the
construction or acquisition of the item of PPE; This shall be
limited to salaries and benefits of employees directly involved
in the project delivery (example: project management or
construction)

• 2. Costs of site preparation;

• 3. Initial delivery and handling costs;

b. Any costs directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the
manner intended by management.

Examples:

• 5. Costs of testing whether the asset is functioning

properly, after deducting the net proceeds from selling
any items produced while bringing the asset to that
location and condition (such as samples produced when
testing equipment); and

• 6. Professional fees.
 Costs not qualified for recognition as PPE

a. Costs of opening a new facility;

b. Costs of introducing a new product or service (including
costs of advertising and promotional activities);
c. Costs of conducting business in a new location or with a
new class of customers (including costs of staff training);
and
d. Administration and other general overhead costs.
 Modes of Acquisition of PPE

• Purchase

• Construction

• exchange transaction

• non-exchange transaction

• transfer and finance lease

 Purchase of PPE.

• PPE acquired through purchase are

charged against appropriations/allotments
or special budget for capital outlay.

• PPE can be purchased on cash basis, on

account, on installment basis, with
promotional items, and at a lump sum
price.
 a) On Cash Basis.

PPE acquired through cash purchase shall initially be

recognized at cost which includes cash paid plus all costs
incurred in bringing the asset to the location necessary
for its intended use such as delivery, installation costs,
etc.

These are recognized in the books of accounts as PPE

after inspection and acceptance of delivery.
 a) On Cash Basis.
Example: An entity purchased a photocopier with the following costs:
Total cost:
Invoice price P45,000
Delivery cost 3,000
Installation cost 1,500
Test run cost 1 ,000
Total 50,500
Less: Withholding Tax 3,140
Net Amount Paid P47,460
 
The accounting entries to recognize the photocopier shall be as follows:
 
Office Equipment P50,500
Cash-MDS, Regular P47,460
Due to BIR 3,140
To recognize cash purchase of office equipment
 a) On Cash Basis.
• Say the purchase price is only P14,500 (w/tax of P500.00)
 
• J/E upon payment:

Semi-Expendable Office Equipment 14,500

Due to BIR 500
Cash-MDS, Regular14,000

• Upon issuance to end-user:

S/E Machinery and Equipment Expenses 14,500

Semi-Expendable Office Equipment 14,500

 
 B. On Account
• When an asset is acquired on account subject to a cash
discount, the cost of the asset is equal to the purchase
price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and
rebates.

• Example: An entity purchased a threshing machine on

account at P200,000, with credit terms of 2/10, n/30.
 b. On Account
Example: An entity purchased a threshing machine on account at
P200,000, with credit terms of 2/10, n/30.

• To recognize purchase of machinery on account

Agricultural and Forestry Equipment P196,000 (200,000-2%)
Accounts Payable P196,000

• To recognize payment of machinery within the discount period

Accounts Payable P196,000

Cash-MDS, Regular P184,240
Due to BIR 11,760 (assumed)
 b. On Account
Example: An entity purchased a threshing machine on
account at P200,000, with credit terms of 2/10, n/30.

• To recognize payment of machinery beyond the discount

period

Accounts Payable P196,000

Other Losses 4,000
Cash-MDS, Regular 188,240
Due to BIR 11,760
 c. On Installment Basis.
• The cost of an item of PPE is the cash price
equivalent or its fair value at the recognition
date.

• However, if acquired through installment and

payment is deferred beyond normal credit
terms, the difference between the cash price
equivalent and the total payment is recognized
as interest over the period of credit
 c. On Installment Basis.
• Example: An entity purchased a bulldozer at an installment price
of P3,000,000. The terms are P500,000 down payment and the
balance is payable in four equal annual installments. The cash
price of the heavy equipment is P2,700,000. The purchase shall
be recognized as follows:

• To recognize the purchase and initial payment for the bulldozer

acquired on installment basis
Construction and Heavy Equipment P2,700,000
Accounts Payable P2,200,000
Cash-MDS, Regular 355,359
Due to BIR 144,641 (assumed)
c. On Installment Basis.
 d. Purchase with promotional items.
• If the promotional item received is the same as the
PPE purchased, the total purchase cost shall be
allocated to the total quantity purchased plus the
promotional item.

• Example: An entity purchased 10 units of motor

vehicles at P330,000 per unit totaling P3,300,000. An
additional unit was received as promotional item.
 d. Purchase with promotional items.

Computation of the cost per unit is P3,300,000/11 units = P300,000.

e. If the promotional item received is
different from the PPE purchased, the cost
of the promo item shall be its fair value.

It shall be deducted from the total cost of

the items purchased and the balance shall
be allocated to the total quantity
purchased.
e. If the promotional item received is different.
Example: An entity purchased a motor vehicle at P330,000. A
window-type air conditioning unit with fair value of P20,000
was received as promotional item. Computation of the cost of
motor vehicle is P330,000 – P20,000 = P310,000.
The journal entry to recognize the motor vehicles are as follows:
f. At a lump sum price
• In case the acquisition of PPE is at a “lump sum
price”, the cost shall be apportioned to the asset
acquired in order to have proper basis for
computing depreciation. The purchase cost shall
be distributed based on the relative fair value of
the assets acquired.

• Example: An entity purchased a land and building

in cash at a single cost of P4,400,000. The land
and building have fair values of P1,000,000 and
P3,000,000,respectively, at the time of
acquisition.
f. At a lump sum price
• Example: An entity purchased a land and building in cash at a single cost
of P4,400,000. The land and building have fair values of P1,000,000 and
P3,000,000,respectively, at the time of acquisition.

• The cost shall be allocated as follows:

f. At a lump sum price
f. At a lump sum price
f. At a lump sum price
 g. Construction of PPE.
… discussed in Chapter 8-Investment Property
• However, where loans intended for the construction of
infrastructure projects that were contracted by the NG and
recorded in the BTr, borrowing cost shall not be capitalized.
Instead, the interest on loans shall be recognized as expenses in
the NG books of the BTr.

If the project is to be constructed by administration, the

procurement of labor and materials shall be in compliance with
the provisions of R.A. No. 9184 and its Revised Implementing
Rules and Regulations. If by job order contracts, refer to relevant
COA and CSC rules and regulations.
• April 26
 Exchange Transactions.

• FV of PPE
– unless (a) the exchange transaction lacks
commercial substance, or
– (b) the fair value of neither the asset received
nor the asset given up is reliably measurable.

• However, if the acquired item is not measured at fair

value, its cost is measured at the carrying amount of
the asset given up.
 Exchange Transactions.
Exchange without Commercial Substance.
If the PPE acquired in an exchange transaction lacks
commercial substance, the cost is measured at the
carrying amount of the asset given up. Consequently, no
gain or loss shall be recognized.
Commercial Substance

• The accounting rules for exchanges once

hinged on whether swapped assets were
similar or dissimilar. However, in a move to
establish international accounting harmony, the
FASB has adopted a global view that all
exchanges that have "commercial substance"
(future cash flows of the entity are expected to
change because of the exchange) should be
accounted for at fair value.
Commercial Substance

• Entity A gives an old truck (P1,000,000 cost,

P750,000 accumulated depreciation) for a
boat. The fair value of the old truck is
P150,000 (which is also deemed to be the
fair value of the boat). The boat should be
recorded at fair value; since that amount is
less than the net book value of the old truck,
a loss is recorded (for the difference):
Commercial Substance

• Entity A gives an old truck (P1,000,000 cost,

P750,000 accumulated depreciation) for a
boat. The fair value of the old truck is
P150,000 (which is also deemed to be the
fair value of the boat). The boat should be
recorded at fair value; since that amount is
less than the net book value of the old truck,
a loss is recorded (for the difference):
Accumulated
750,000
Depreciation (old)

Loss (Other Losses) 100,000

Equipment (new) 150,000

Equipment (old) 1,000,000

(Accounts Used for illustration purposes only)

To remove all accounts related to the old truck, set up the new boat at its fair
value, and record the balancing loss.
Entity A gives an old truck (P1,000,000
cost, P750,000 accumulated
depreciation) for a boat. The fair value of
the old truck is P350,000 (which is also
deemed to be the fair value of the boat).
The boat should be recorded at fair value;
since that amount is more than the net
book value of the old truck, a gain is
recorded (for the difference):
Accumulated
Depreciation 750,000
(old)

Equipment
350,000
(new)

Gain (Other
100,000
Gains)

Equipment (old) 1,000,000

To remove all accounts related to the old truck, set up the new boat
at its fair value, and record the balancing gain.
Exchange transactions are oftentimes accompanied by giving
or receiving "boot."

Boot is the term used to describe additional monetary

consideration that may accompany an exchange transaction.
Its presence only slightly modifies the above accounting by
adding one more account (typically Cash) to the journal entry.
For instance, assume

Example A is amended to add the following facts: Entity A

also gave P50,000 cash along with the old truck, because the
old truck was only worth P100,000:
 Accumulated
6-30-X3 750,000
Depreciation (old)

Loss (Other Losses) 150,000

Equipment (new) 150,000

CIB-LCCA 50,000

Equipment (old) 1,000,000

To remove all accounts related to the old truck and cash, set up the new boat at
its fair value, and record the balancing loss.
 Non-exchange Transaction..

• PPE acquired through a non-exchange

transaction, such as donation, presidential
proclamation, taxes, transfers and grants, its
cost shall be measured at its fair value as at the
date of acquisition.

• However, this does not constitute revaluation. If

the fair value cannot be determined, the asset
shall be recorded at a nominal value (the value
that is stated on currency or face value).
 Donation without Condition.
• Cost of PPE acquired through donation without
condition shall be taken up at its fair value at the date
it is acquired.

• All expenses incurred in connection with the donated

asset, such as delivery and installation costs, shall be
included in the amount recognized as asset.

• The fair value of the PPE shall be recognized as

“Income from Grants and Donations in Kind.”
Donation without Condition.
Donation with Condition.

• Where a PPE is acquired through donation with

conditions or restrictions, a liability account shall be
recognized until the conditions or restrictions have been
fulfilled.
Donation with Condition.

• Assume that the school building constructed by administration

costing P600,000 has been inspected and accepted by Entity A.

• (Note: Assume that the transactions on the construction of the

building were already recognized.)
Donation with Condition.
Repairs and Maintenance.

• maintain or improve the functionality and

capacity of the PPE;
• increase its service life;
• improve the quality of its output;
• or reduce the operating cost.

• These may be categorized into major and minor

repairs.

• Minor repairs shall be directly charged to expense

account “Repairs and Maintenance” of the PPE
Repairs and Maintenance.

• Minor repairs shall be directly charged to expense

account “Repairs and Maintenance” of the specific
PPE while major repairs shall be added to the
carrying amount of the PPE and shall be depreciated
over the remaining life of the PPE.

• Where cost cannot easily be differentiated between a

minor or major repair, it shall be treated as expense.
Repairs and Maintenance.

• Minor repairs shall be directly charged to expense

account “Repairs and Maintenance” of the specific
PPE while major repairs shall be added to the
carrying amount of the PPE and shall be depreciated
over the remaining life of the PPE.

• Where cost cannot easily be differentiated between a

minor or major repair, it shall be treated as expense.
Repairs and Maintenance.
 Depreciation
• PPE gradually loses its ability to provide service over the course of
time. Because of this, its cost needs to be distributed on a
systematic basis over its useful life. The allocated cost is referred to
as depreciation.
• The depreciation charge for each period shall be recognized as
expense unless it is included in the carrying amount of another
asset. For example, the depreciation of manufacturing plant and
equipment is included in the costs of conversion of inventories.

• Similarly, depreciation of PPE used for development activities may

be included in the cost of an intangible asset recognized.
•  
 Depreciation
• The following are policies regarding depreciation of
PPE:

a. There are three factors an entity must consider in

determining depreciation:

1. Initial cost,
2. Useful life, and
3. Expected residual value at the end of its useful life.
 Depreciation
b. Except for land and heritage assets, all PPE shall be
depreciated.

c. Depreciation of an asset begins when it is available for use

such as when it is in the location and condition necessary for
it to be capable of operating in the manner intended by
management.

For simplicity and to avoid proportionate computation, depreciation shall

be for one month if the PPE is available for use on or before the 15th of the
month. However, if the PPE is available for use after the 15th of the month,
depreciation shall be for the succeeding month.
 Depreciation
d. A residual value equivalent to at least five percent (5%)
of the cost shall be adopted unless a more appropriate
percentage is determined by the entity based on its
operation subject to the approval of COA.

e. Generally, infrastructure assets have no residual value.

In case, the residual value of parts of the infrastructure
assets can be determined, the policy of at least five
percent (5%) of the cost of that part shall be applied.
 Depreciation
f. The computation of monthly depreciation expense shall be as
follows:

(Cost – Residual Value)

Depreciation Expense = ------------------------------
Estimated Useful Life (in months)

g. Depreciation shall be recognized as a debit to the “Depreciation

Expense” account and a credit to the “Accumulated Depreciation”
account.

Accumulated Depreciation is a contra-asset account presented in the

FS as deduction from the related asset account. Depreciation
expense shall be recognized on a monthly basis.
 Depreciation
Example: On June 5, 2022, an office equipment was purchased at
P122,000 and has an estimated useful life of 5 years and 5% residual
value. Said equipment was available for use on June 20, 2022.
 
Mo. Depreciation = (P122,000 – P6,100) / 60 months = P1,931.67
 
The accounting entry shall be as follows:
 
• June 30, 2022 - No depreciation expense recognized.
 
• July 31, 2022
D/E-Office Equipment P1,931.67
A/D-Office Equipment P 1,931.67
To recognize depreciation for the month of July 2022
 Depreciation
h. Each part of an item of PPE with a cost that is significant in
relation to the total cost of the item shall be recorded and
depreciated separately.

• example
The engine amounting to P15,000,000 and the passenger
seats amounting to P5,000,000 are expected to be replaced
after 5 years of continuous use with 5% residual value. The
remaining parts of the aircraft are estimated to have a
residual value of P2,250,000 after 20 years.
• A lapsing schedule is a spreadsheet that lists the
purchase date, depreciation, and other accounting
actions related to a PPE. The intent of the schedule is
to show the rate at which the book value of a fixed
asset declines over time. This information is compared
to the book value stated in a company's
accounting records to see if they match; if not, and
assuming that the spreadsheet is correct, an
adjusting entry is needed to alter the book value
figure. This schedule is useful for ensuring that fixed
asset values are correctly stated in an organization’s
accounting records.
 Depreciation
Lapsing Schedule:

Estimate Monthly
d Life Depreciation
Residual Depreciable
Parts Date Used Cost Value (5%) Cost
 
Mos
Yrs. .
Engine 06-Feb-19 15,000,000 750,000 14,250,000 5 60 237,500

Passenger Seats 06-Feb-19 5,000,000 250,000 4,750,000 5 60 79,167

Remaining Parts 06-Feb-19 45,000,000 2,250,000 42,750,000 20 240 178,125

Total   65,000,000  
      494,792

               
 Depreciation

The accounting entry to recognize the depreciation is as follows:

 
Depreciation Expense-Transportation Equipment 494,792
A/D-Aircrafts and Aircrafts Ground Equipment 494,792
To recognize monthly depreciation
Impairment

A property is said to be impaired when its carrying amount in

the Statement of Financial Position exceeds its recoverable
service amount or recoverable amount due to fall in market
value of an asset.
 Computation of Value in Use
1. Depreciated Replacement Cost Approach
– Value in use is equal to the asset’s replacement cost adjusted
for depreciation to reflect the asset’s used condition.
– Replacement cost is the cost of replacing or reproducing the
asset, whichever is lower.  
2. Restoration Cost Approach
– Value in use = Depreciated replacement cost minus Estimated
restoration cost.
– Restoration cost is the cost of restoring the service potential of
an asset to its pre-impaired level.
3. Service Units Approach
– Value in use = Depreciated replacement cost minus a
proportionate reduction to reflect the reduced number of
service units expected from the asset in its impaired state.
Heritage assets are those assets which have historical, cultural and
environmental significance, and are intended to be preserved in trust for
future generations.

Examples of heritage assets include:

- historical buildings and monuments
- statues,
- museum and gallery collections
- archeological sites,
- national archives,
- ruins,
- conservation areas
- nature reserves Heritage Assets.
- works of art.
 Heritage Assets
• Heritage assets are measured at cost. They
are not depreciated, but subject to
impairment.

• However, heritage assets that have future

economic benefits other than their heritage
value are depreciated similar to the other
items of PPE, e.g., a historic building being
used as office.
 Infrastructure Assets
• Infrastructure assets include road networks
(including facilities, such as traffic lights and road
signage), flood control, sewer, water and power
supply systems, communications networks,
railways, seaports, airports, and the like. 
• Infrastructure assets are accounted for similar to
the other items of PPE, i.e., they are initially
measured at cost and subsequently depreciated.
• However, generally, infrastructure assets have no
residual value. In cases where a part of an
infrastructure asset has a residual value, it shall be
at least 5% of the cost of that part.
 Reforestation Projects
• Reforestation refers to the renewal of a forest
cover by planting seeds or young trees.
• Reforestation projects are recorded as land
improvements.  
• Subsequent costs are accounted for as follows:
– Maintenance and protection costs incurred
within the duration of the project are
capitalized.
– Those incurred after the turn-over of the
project are charged as expense.
 Derecognition
• A PPE is derecognized when it is disposed or when
no future economic benefits is expected from it.
• On derecognition, the difference between the
carrying amount and the net disposal proceeds, if
any, is recognized as gain or loss in surplus or
deficit.
Derecognition
Derecognition
Idle, Fully Depreciated, & Unserviceable PPE
• Idle PPE refers to assets that are temporarily
taken out of active use or temporarily
abandoned. Idle PPE are not derecognized but
continued to be depreciated.
• A PPE is fully depreciated when its carrying
amount is equal to zero or its residual value. Fully
depreciated PPE are not derecognized.
• Unserviceable property are those which do not
have future economic benefits. Unserviceable
property is derecognized.  
 Lost PPE
• When a PPE is lost, e.g., through force majeure, the officer
having custody of the PPE shall immediately notify the COA
within 30 days and shall submit an application for relief, together
with supporting evidence. If warranted by the evidence, a credit
for loss shall be allowed. Failure to do the requirements will not
relieve the officer of liability. (P.D. No. 1445, Sec. 73)
• The carrying amount of the lost PPE is derecognized and charged
as loss.
• Pending the result of the investigation, the accountability of the
officer shall be established, equal to the depreciated
replacement cost of the lost PPE. If a credit for loss is
subsequently allowed to the officer, the accountability is simply
reversed. If not, the officer shall pay cash to settle his
accountability.
Lost PPE
Lost PPE
Lost PPE
Lost PPE
 Receipt and Disposition of PPE
• The procedures in the receipt and disposition of
PPE are similar to those of inventories.
• Property Card – used by the Supply/Property
Division to record all movements in items of PPE.
This is the equivalent of the Stock Card used for
inventories. 
• Property, Plant and Equipment Ledger Card –
used by the Accounting Division to record all
movements in items of PPE, both in quantity and
monetary amount. This is the equivalent of the
Stock Ledger Card used for inventories. 
 Receipt and Disposition of PPE
• Property Acknowledgement Receipt – used by the
Supply/Property Division to record the issuance
of PPE to the end user. This is based on the
approved Requisition and Issue Slip (RIS)
submitted by the requesting individual. This is the
equivalent of the Report of Supplies and
Materials Issued used for inventories.
• Report on the Physical Count of Property, Plant
and Equipment – At the end of each year, the
entity shall perform a physical count of PPE and
prepare this report. This report shall be submitted
to the COA not later than January 31 of the
following year.
 Receipt and Disposition of PPE
• Inventory and Inspection Report for Unserviceable
Property – used to account for all unserviceable
property subject to disposal.
• Report of Lost, Stolen, Damaged or Destroyed
Property – used by the accountable officer to
notify the concerned officials of the lost, stolen,
damaged or destroyed property. 
• Property Transfer Report – used to record
transfers of property from one accountable
officer to another.
• Related to Assignment 2
• Biological Asset – is a living
animal or plant
• Agricultural Produce – is the
harvested product of the entity’s
biological assets.
Biological assets Agricultural Inventory
produce
Trees in a Felled trees Logs, Lumber
plantation forest
Plants Harvested cane Sugar
Corn Corn Starch
Cotton Clothing
Dairy cattle Milk Cheese
Sheep Wool Yarn, Carpet
Pigs Carcass Ham
Bushes Leaf Tea
Vines Grapes Wine
Fruit trees Picked fruit Processed fruit
 Measurement
• Biological assets - initially and subsequently
measured at fair value less costs to sell. Gain
or loss arising from measurement are
recognized in surplus or deficit.
• Biological assets whose fair value cannot be
reliably determined on initial recognition are
initially measured at cost and subsequently
measured at cost less accumulated
depreciation and accumulated impairment
losses.
• Agricultural produce - initially measured at fair
value less costs to sell at the point of harvest.
 Determination of Fair value
Quoted price in an active market xx
Less: Transport costs (xx)
Fair value xx

 If there are more than one active markets,

the entity shall use the price in the market
expected to be used.
Determination of Fair value (continuation)

 If there is no active market, the entity shall

estimate the market price based on one of
the following:
– Most recent market transaction price
– Market prices for similar assets with
adjustment to reflect differences
– Sector benchmarks
– Present value of expected net cash flows
from the asset.
 aSSIGNMENt
Assignment_Inventories
, PPE, Investment Property & Biological Assets.docx 
OPEN FORUM
QUESTIONS????
REACTIONS!!!!!
END