IAS 16 PPE

This is a post of my own detailed and thorough explanation on the standards of the subject I'm taking, P2 Corporate Reporting (ACCA)

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IAS 16 Property, Plant and Equipment

There are three recognition criteria. It must be a tangible assets that are used in business for more than one year. It could generate future economic benefits and is not for resale or trading purposes. The costs must also be measured reliably.

Costs can be recognized when the PPE is purchased and all the expenses which is necessary to bring the asset into working condition. For example, installation costs, pre-production testing cost, import duties and etc. When PPE is self-constructed, all construction costs can also be recognized but exclude abnormal loss.

Subsequent costs is an expenses incurred on PPE after the initial recognition. For example, costs for renovation, modification, repair, repainting and etc. It can be capitalized when it can generate extra future economic benefit if not, it will be written off as expenses.

All PPE must be carry at net book value. It is cost less accumulated depreciation. However, it can also be carry at fair value.

When PPE is revalued, it must be revalued regularly and the entire class of the assets must be revalued too.

If it's a revaluation surplus, it will go to Reserve in the Other Comprehensive Income. However, it will go to Income to reverse a previous deficit provided that 'the new carrying amount must not exceed the carrying amount of the asset if no revaluation has previously taken place.' The excess will then go to reserve.

If it's a revaluation deficit, it will go to expenses in Statement of Profit or Loss. However, if previously there is a surplus, it will set off the previous surplus. The excess will then go to expenses.

Surplus

DR Land

     CR Revaluation Reserve

(There's a deficit previously)

DR Land

     CR Statement of Profit or Loss(Income)

     CR Revaluation Reserve

Deficit

DR Statement of Profit or Loss

     CR Land

(There's a surplus previously)

DR Revaluation Reserve

DR Statement of Profit or Loss

     CR Land

Ends,