IAS 16 – Property, Plant and Equipment

Introduction

Executive Summary

According to IAS 16, items of property, plant and equipment are to be recognized at cost initially i.e. the cost incurred to buy an asset or to construct an asset including all such costs that are incurred to bring the asset into its intended use. Once the asset is ready for its intended purpose and can be put to use, the devaluation of asset is recorded following a systematic approach which should be inline with the benefits rendered by such assets and standard allows the use of different approach. As the useful life of majority of these assets is long thus may require revaluation in asset’s value, useful life and/or depreciation rate due to changing circumstances. It also provide guidance on accounting for expenditures incurred after initial recognition and how to account for such expenditures. Separate component assets or complex assets are now part of real world business environment and required clear approach on depreciating such assets and are dealt in IAS 16. Lastly, the disposal of asset and how to account for sale of items of property, plant and equipment and disclosure requirements for better understanding of users of financial statements.