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IND AS 16-Property, Plant and Equipment

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Ind AS 16 property, plant and equipment pertains to all property, plant & equipment unless and until any other accounting standard asks for specific treatment.

Ind AS 16 property, plant and equipment is not applied in the following circumstances: 

  • Property, plant, and equipment are held for sale as per Ind AS 105. 
  • The estimation and recognition of exploration and evaluation assets.
  • Biological assets are related to agricultural activities except for bearer plants. 
  • Mineral rights and reserves like oil, natural gas.

The cost of PPE must be recognized as an asset only when: 

  • The future economic benefits related to such assets would flow to the business; and 
  • The cost of the asset could be reliably measured.

Constituents of cost
The cost of the PPE items includes: 

  • Purchase price (including import duties and any non-refundable taxes) after deducting trade discounts and rebates on such PPE items. 
  • Costs which are directly due to bringing assets to the condition and location essential for it to operate in a manner as planned by the management.
  • Initial estimate of costs of removing and demolition an item and restoring a site where it is located.

Measurement after recognition
A business must choose the revaluation or cost model as the accounting policy and apply it to its entire class of property, plant and equipment (PPE).

Cost model
After recognizing an asset, property, plant and equipment (PPE) should be carried at the cost reduced by the accumulated depreciation and impairment losses (if any).

Revaluation model
After recognizing an asset, property, plant, and equipment (PPE) whose fair value could be certainly estimated should be carried at the reassess amount, being the fair value at revaluation date and reduced by consecutively accumulated depreciation and successive accumulated impairment losses (if any). 

Following revaluations can be considered under PPE:

  • Revaluations of PPE should be made with reasonable regularity for assuring that PPE’s carrying amount does not differ significantly from that which would be determined if fair value is used at the end of the reporting period.
  • If property, plant, and equipment (PPE) item is revalued, the whole class of such property, plant, and equipment to which such asset belongs should be revalued.
  • If the carrying amount of an asset increases due to revaluation of assets, such growth should be credited to other comprehensive income and should be assembled in equity. However, such an increase should be recognized in the profit & loss (P/L) statement to the extent of reversing a revaluation decrease of similar assets recognized previously in the profit & loss (P/L) statement. 
  • If the carrying amount of an asset is decreased due to the revaluation of such asset, such a decrease should be recognized in the P/L account. However, such reduction should be debited to other comprehensive income to the extent of credit balances available in revaluation surplus account regarding similar assets.

Each part of property, plant, and equipment cost, which is substantial concerning the total cost of the PPE, should be separately depreciated. The amount of depreciation should be allocated over the useful life of an asset. The standard also requires:

  • The method of depreciation which will be used should reflect an asset’s pattern of future economic benefits.
  • At each balance sheet date, three standards require the review of depreciation:
    • Residual value and
    • The useful life of assets 
    • Depreciation method employed

The carrying amount of PPE should be derecognized:

  • At the time of their disposal; or 
  • When there are no future economic benefits foreseen from the use or disposal of such asset, any gain or loss arising from such de-recognition should be included in the Statement of Profit and Loss statement when such item is derecognized. Gains arising from such de-recognition should not be classified as part of revenue.

Disclosure Requirements
Ind AS 16 should disclose, for every class of property, plant, and equipment (PPE):

  • Measurement basis for determining the carrying amount. 
  • Depreciation methods are used. 
  • Depreciation rates/useful life of the assets. 
  • Existence and value of restrictions on the title and PPE assured as collateral for liabilities.
  • Amount of expenditure concedes in carrying amount of PPE during its construction.

At AJSH, we assist our clients in bookkeeping, payroll, auditing, taxation, secretarial compliances and preparation of financial statements ensuring compliances with applicable accounting standards. If you have any questions or wish to know more about compliances with IND AS 16, kindly contact us.


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