PLANT ASSET/FIXED ASSET during a particular period for purposes other
- Bundle of future services, can be thought as than to produce inventories during that period.
prepaid expenses
- Are tangible assets that are held for use in The cost of an item of property, plant and equipment
production or supply of goods/services, for shall be recognised as an asset if, and only if:
rental, administrative purposes, expected to be (a) it is probable that future economic benefits
used during more than one period associated with the item will flow to the entity; and
- Long term/permanent (b) the cost of the item can be measured reliably.
CHARACTERISTICS OF PPE
● Tangible IAS 16 PAR. 11. Items of property, plant and equipment
● Owned and used by company in its normal may be acquired for safety or environmental reasons.
operations The acquisition of such property, plant and equipment,
● Not offered for sale although not directly increasing the future economic
● Expected to last/utilize for years (more than one benefits of any particular existing item of property, plant
year) and equipment, may be necessary for an entity to
Example. obtain the future economic benefits from its other
Land Aircraft assets. Such items of property, plant and equipment
Land Improvements Motor vehicle qualify for recognition as assets because they enable
Building furniture and fixtures an entity to derive future economic benefits from related
Machinery Office Equipment assets in excess of what could be derived had those
Ship Tools items not been acquired. For example, a chemical
Patterns, molds and dies Bearer Plants manufacturer may install new chemical handling
processes to comply with environmental requirements
MAJOR SPARE PARTS AND STANDBY EQUIPMENT for the production and storage of dangerous chemicals;
qualify as PPE if the entity expects to use them during related plant enhancements are recognised as an asset
more than one period. because without them the entity is unable to
manufacture and sell chemicals. However, the resulting
MAJOR CATEGORIES OF PLANT ASSETS carrying amount of such an asset and related assets is
1. TANGIBLE PLANT ASSETS reviewed for impairment in accordance with IAS 36
2. INTANGIBLE PLANT ASSETS Impairment of Assets.
3. NATURAL RESOURCES
DIRECTLY ATTRIBUTABLE COSTS
Measurement at Recognition a. Costs of employee benefits arising directly from
PRINCIPLE 1: The cost of a plant asset includes all the acquisition of PPE
expenditures that are reasonable and necessary for b. Cost of site preparation
getting the asset to the desired location and ready for c. Initial delivery and handling cost
use. d. Installation and handling cost
Elements of Cost e. Installation and assembly cost
An item of property, plant and equipment that qualifies f. Professional fees
for recognition as an asset shall be measured at its g. Costs of testing whether the asset is functioning
cost. properly
h. Sales taxes
Elements of cost The cost of an item of property, plant i. Purchase price
and equipment comprises: j. Delivery costs
a. its purchase price, including import duties and
non-refundable purchase taxes, after deducting COSTS OF FIXED ASSETS
trade discounts and rebates. LAND
b. any costs directly attributable to bringing the ● Professional fees
asset to the location and condition necessary for ● Purchase price
it to be capable of operating in the manner ● Sales taxes
intended by management. ● Permits from the government
c. the initial estimate of the costs of dismantling ● Broker’s commissions
and removing the item and restoring the site on ● Title fees
which it is located, the obligation for which an ● Surveying fees
entity incurs either when the item is acquired or ● Delinquent real estate taxes
as a consequence of having used the item ● Removing unwanted building less any salvage
value
● Draining, clearing, Grading and levelling payment is recognised as interest over the period of
● Escrow fees credit unless such interest is capitalised in accordance
● Government assessment, whether incurred at with IAS 23.
the time of purchase or later such as public
roadway, sewers, and sidewalks and drainage
● Costs of tearing down and removing unusable
building less any recovered through sale of
salvaged materials
BUILDING
● Professional fees
● Insurance costs incurred during construction
● Interest on money borrowed to finance
construction
● Sales taxes
● Repairs
● Reconditioning
● Modifying for use
● Permits from government
● Remodeling
● Brokerage fees
● Purchase price
● Contract Price
● Materials
● Labor
● Professional fees
● Building permits
● Insurance during construction
● Interest during construction
● Title fees
● Movable furniture and fixtures
● Excavation
● Repairs and renovations
MACHINERY AND EQUIPMENT
● Sales Taxes
● Freight
● Installation
● Repairs
● Reconditioning
● Insurance while in transit
● Assembly
● Modifying for use
● Testing for use
● Permits from government agencies
LAND IMPROVEMENTS
● Trees and shrubs
● Fences
● Outdoor lighting
● Paved parking areas or walkways
● Driveways
● Fences, parking lots, landscaping, sprinkler
systems
IAS 16 PAR Measurement of cost The cost of an item
of property, plant and equipment is the cash price
equivalent at the recognition date. If payment is
deferred beyond normal credit terms, the difference
between the cash price equivalent and the total