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 recognized in relation to them.
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, and only 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 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 payment is recognised as interest over the period of credit unless such interest is
capitalised in accordance with IAS 23.
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. [source:
www.ifrs.org]
Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University
