Definition;
Assets of a company having physical existence and expected to be used for a period exceeding one year form a part of property, plant and equipment. Property, plant and equipment are alternatively referred to as tangible fixed assets.
Explanation
An example of a business with a high amounts of PP&E would be a shipping company, because most of its assets would be tied into its fleet of ships and administrative buildings. On the other hand, a management consulting firm would have less PP&E, because a consultant would only need a computer and an office in a building to run its operations.
This item is listed separately in most financial statements because PP&E is treated differently in accounting statements. This is because improvements, replacements and betterments can pose accounting issues depending on how the costs are recorded.
Objective;
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.
Important components of property, plant and equipment
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.
The cost of an item of property, plant and equipment shall be recognised as an asset if,
(a) it is probable that future economic benefits associated with the item will flow to
the entity; and
(b) the cost of the item can be measured reliably
Measurement at recognition: An item of property, plant and equipment that qualifies
for recognition as an asset shall be measured at its cost.
The cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs either
when the item is acquired or as a consequence of having used the item during a
particular period for purposes other than to produce inventories during that period.
The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.
Assets of a company having physical existence and expected to be used for a period exceeding one year form a part of property, plant and equipment. Property, plant and equipment are alternatively referred to as tangible fixed assets.
Explanation
An example of a business with a high amounts of PP&E would be a shipping company, because most of its assets would be tied into its fleet of ships and administrative buildings. On the other hand, a management consulting firm would have less PP&E, because a consultant would only need a computer and an office in a building to run its operations.
This item is listed separately in most financial statements because PP&E is treated differently in accounting statements. This is because improvements, replacements and betterments can pose accounting issues depending on how the costs are recorded.
Objective;
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.
Important components of property, plant and equipment
- Land and land improvements
- Buildings
- Plant and machinery
- Vehicles
- Equipment, etc
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.
The cost of an item of property, plant and equipment shall be recognised as an asset if,
(a) it is probable that future economic benefits associated with the item will flow to
the entity; and
(b) the cost of the item can be measured reliably
Measurement at recognition: An item of property, plant and equipment that qualifies
for recognition as an asset shall be measured at its cost.
The cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs either
when the item is acquired or as a consequence of having used the item during a
particular period for purposes other than to produce inventories during that period.
The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.
No comments:
Post a Comment