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2-PPE

Property, Plant, and Equipment (PPE) are tangible assets used for production, rental, or administrative purposes and are expected to last beyond one accounting period. PPE is recognized when future economic benefits are probable and costs can be reliably measured, with initial measurement at cost and subsequent measurement using either the cost or revaluation model. Key aspects include systematic depreciation, impairment recognition, derecognition upon disposal, and specific disclosure requirements as per IAS 16 / PAS 16 standards.

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2 views

2-PPE

Property, Plant, and Equipment (PPE) are tangible assets used for production, rental, or administrative purposes and are expected to last beyond one accounting period. PPE is recognized when future economic benefits are probable and costs can be reliably measured, with initial measurement at cost and subsequent measurement using either the cost or revaluation model. Key aspects include systematic depreciation, impairment recognition, derecognition upon disposal, and specific disclosure requirements as per IAS 16 / PAS 16 standards.

Uploaded by

rmaelopezhobro
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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### **Definition of PPE**

Property, Plant, and Equipment (PPE) are tangible assets that:

1. Are held for use in the production or supply of goods or services, for rental to others, or for
administrative purposes.

2. Are expected to be used during more than one accounting period.

---

### **Recognition of PPE**

1. **Initial Recognition**: PPE is recognized as an asset when:

- It is probable that future economic benefits will flow to the entity.

- The cost of the asset can be measured reliably.

2. **Cost of PPE**: Includes:

- Purchase price (including import duties and non-refundable taxes).

- Costs directly attributable to bringing the asset to its intended use (e.g., delivery, installation, testing).

- Estimated dismantling or restoration costs.

---

### **Measurement of PPE**

1. **Initial Measurement**: At cost.

2. **Subsequent Measurement**:

- **Cost Model**: PPE is carried at cost less accumulated depreciation and impairment losses.

- **Revaluation Model**: PPE is carried at revalued amount (fair value at revaluation date less
depreciation and impairment).
---

### **Depreciation**

1. **Definition**: Systematic allocation of the depreciable amount of an asset over its useful life.

2. **Depreciation Methods**:

- Straight-line

- Declining balance

- Units of production

3. **Key Factors for Depreciation**:

- Cost of the asset

- Residual value

- Useful life

---

### **Impairment of PPE**

1. An asset is impaired if its carrying amount exceeds its recoverable amount (higher of fair value less
costs to sell or value in use).

2. Impairment losses are recognized in profit or loss.

---

### **Derecognition of PPE**

1. PPE is derecognized:
- Upon disposal, or

- When no future economic benefits are expected from its use or disposal.

2. Gain or loss on derecognition is recognized in profit or loss.

---

### **Disclosure Requirements**

1. Measurement bases used.

2. Depreciation methods and rates.

3. Gross carrying amount and accumulated depreciation.

4. Reconciliations of carrying amount (additions, disposals, revaluations, etc.).

---

### **Applicable Standards**

- **IAS 16 / PAS 16**: Property, Plant, and Equipment.

Let me know if you need examples or specific computations!

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