IAS 16 PPE

The standard applies to tangible items that will be used for administrative use or for production.
if the tangible items are held for rental or for capital appreciation, then IAS 40 - Investment Property applies.
This standard is the basis for all latter standards dealing with tangible assets i.e. IAS 17 leases, IAS 20 Government Grants and Disclosure of Government Assistance, IAS 23 Borrowing Costs, IAS 36 Impairment of assets and IAS 40 Investment Property.

The key pointers are that at acquisition, we capitalize the cost of the asset. Cost refers to all expenses necessary to bring the asset to the LOCATION and CONDITION intended by management. As such, purchase price (less trade discounts only)plus transport and installation costs are capitalized.

Subsequently, we have the choice of two alternatives;
Cost model: Cost less depreciation less impairment losses
Revaluation model: revalued amount less depreciation less impairment losses.

Under the revaluation model, any revaluation gains are transferred to a revaluation reserve while revaluation losses are transferred to profit and loss. However, revaluation gains will be transferred to profit and loss if previously there had been a loss which had been taken to profit and loss. in the same vein, revaluation losses will be transferred to the revaluation reserve account if in the previous periods there had been a revaluation surplus which had been taken to the revaluation reserve account.

All property, plant and equipment (whether owned outright or on lease under a finance lease) is disclosed as a single line item under the subheading of Non Current Assets in the Statement of financial position.

Statement of financial position (extract)
Non Current Assets
Property, Plant and Equipment (at NBV) XX

Isaac
www.euriskconsulting.co.ke