IAS 16 Property, Plant and Equipment

Synopsis

• Property, plant and equipment (PPE) should be recognised initially at cost. 
• Cost comprises all directly attributable costs in bringing the asset to the location and condition necessary for normal use. 
• Subsequently, either the cost or revaluation model may be applied. An entity must apply the same measurement model consistently to each class of PPE.
• Revaluation surpluses are recognised as other comprehensive income and accumulated in equity
• Items of PPE must be depreciated on a systematic basis over their useful life
• On disposal, the difference between the carrying amount of the asset and proceeds received is recognised in profit or loss.

• Read the unaccompanied version of IAS 16

Which version of the standard?

'Which version of the standard?' is only available to members of the Financial Reporting Faculty. Please note that to access electronic versions of IFRS through the links in these standard trackers you need to have first logged into eIFRS.

Required Standards book for a particular year assumes that there is no early application of issued but not yet effective IFRSs; The Issued Standards book assumes early application of all issued IFRSs.

For the latest version of the standard, and where the amendments are to be adopted early, refer to IAS 16 2019 Issued Standards.

Recent amendments

Full access to details of all the amendments is only available to Financial Reporting Faculty members. Find out how to join the faculty.

*Not EU endorsed as at 2 December 2019. Read more on EU endorsement.

The following interpretations refer to IAS 16

• IFRIC 12 Service Concession Arrangements

  Accounting guidance for arrangements where a contract is granted for the supply of public services such as roads.

• IFRIC 18 Transfers of Assets from Customers

  Provides guidance on the situation where a customer transfers an asset to an entity in order for that entity to provide a service.

• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

  Addresses the accounting treatment of mine waste materials, which are the materials removed by mining entities in order to gain access to mineral ore deposits.

Current proposals

1. The IASB is engaged in a project to make a narrow-scope amendment to IAS 16 to clarify that where items produced before an item of PPE is available for use, the proceeds of sale may not be deducted from the cost of the PPE. An exposure draft was issued in June 2017.

• Read ED/2017/4 Property, Plant and Equipment – Proceeds before Intended Use

UK reduced disclosures

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Amendments to the standard

Where an entity applies FRS 101, it is preparing Companies Act accounts rather than IAS accounts. Therefore, in order to achieve compliance with the Companies Act and related Regulations, guidance in IAS 16 allowing the carrying amount of property, plant and equipment to be reduced by government grants is deleted.

Disclosure exemptions

FRS 101 paragraph 8(f) states that a qualifying entity is exempt from the requirement to disclose a reconciliation of the carrying amount of property, plant and equipment at the beginning and end of the comparative period. 

IAS 16 paragraph for which exemption is available: 73(e) (comparative period only).

Other resources

Factsheets:

• 2016 IFRS Accounts 
  Provides more information on amendments 2 and 4.

This page was last updated 26 March 2019