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Objective
1. The objective of this Standard is to
prescribe the accounting treatment for
property, plant and equipment so that users of the financial statements can discern
information about an entity’s investment in its property,
plant and equipment and the changes in such investment. The principal issues in
accounting for property, plant and equipment are
the recognition of the assets, the determination of their
carrying amounts
and the depreciation charges and impairment losses to be recognised in relation
to them.
Scope
2. This Standard shall be applied in
accounting for property, plant and equipment
except when another Standard requires or permits a
different
accounting treatment.
3. This
Standard does not apply to:
(a)
property, plant and equipment classified as held for
sale in accordance with IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations;
(b)
biological assets related to agricultural activity
(see IAS 41 Agriculture);
(c) the
recognition and measurement of exploration and
evaluation assets (see IFRS 6 Exploration for and
Evaluation of Mineral Resources); or
(d)
mineral rights and mineral reserves such as oil,
natural gas and similar non-regenerative resources.
However, this
Standard applies to property, plant and equipment used
to develop or maintain the assets described in (b) to
(d).
4. Other Standards may require recognition of
an item of property, plant and
equipment based on an approach different from that in this Standard. For example,
IAS 17 Leases requires
an entity to evaluate its
recognition of an item of leased property, plant and equipment
on the basis of
the transfer of risks and rewards. However, in such cases other aspects of the
accounting treatment for these assets, including depreciation,
are prescribed by this Standard.
5. An entity shall apply this Standard to
property that is being constructed
or developed for future use as investment property but does
not yet satisfy the definition of ‘investment property’ in
IAS 40 Investment
Property.
Once the construction or development is complete,
the property becomes investment property and the entity is required to apply IAS
40. IAS 40 also applies to investment property that
is being redeveloped for continued future use as investment property. An entity
using the cost model for investment property in accordance
with IAS 40 shall use the cost model in this Standard.
Definitions
6. The following terms are used in this
Standard with the meanings specified:
Carrying amount is the amount at which
an asset is recognised after deducting
any accumulated depreciation and accumulated impairment
losses.
Cost is the
amount of cash or cash equivalents paid or the fair
value of other consideration given to acquire an asset
at the time of its acquisition or construction or, where
applicable, the amount attributed to that asset when
initially recognised in accordance with the specific
requirements of other IFRSs, eg IFRS 2 Share-based
Payment.
Depreciable amount is the cost of an
asset, or other amount substituted
for cost, less its residual value.
Depreciation is the systematic
allocation of the depreciable amount of
an asset over its useful life.
Entity-specific value is the present
value 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.
Fair value is the amount for which an
asset could be exchanged between
knowledgeable, willing parties in an arm’s length
transaction.
An impairment loss is the amount by
which the carrying amount of an
asset exceeds its recoverable amount.
Property, plant and equipment are
tangible items that:
(a) are held for use in the production or
supply of goods or
services,
for rental to others, or for administrative purposes;
and
(b) are expected to be used during more than
one period.
Recoverable amount is the higher of an
asset’s net selling price and its
value in use.
The residual value of an asset is the
estimated amount that an 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.
Useful life is:
(a) the period over which an asset is expected
to be available for use
by an entity; or
(b) the number of production or similar units
expected to be obtained
from the asset by an entity.
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