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

The International Accounting Standards Board (IASB) provides free access to the consolidated unaccompanied international accounting standards for the current year through its website. Free registration is required.

This unaccompanied version does not include additional content that accompanies the full standard, such as illustrative examples, implementation guidance and bases for conclusions.

Which version of the standard?

Financial Reporting Faculty members who joined the faculty prior to 1 November 2022 have premium access to the consolidated edition of IFRS and amendments through the IASB's IFRS Standards Navigator service. Please log into IFRS Standards Navigator to access electronic versions of the standards through these links.

Please be aware that as part of the changes to ICAEW faculty membership, this service will be withdrawn after 31 December 2022.

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.

The following interpretations refer to IAS 16

• IFRIC 1 Existing Decommissioning, Restoration and Similar Liabilities
  Addresses accounting for a change in a provision that is included in the carrying amount of an item of PPE.
• IFRIC 12 Service Concession Arrangements
  Accounting guidance for arrangements where a contract is granted for the supply of public services such as roads.
• 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.
• SIC 29 Disclosure – Service Concession Arrangements
  Prescribes disclosures required by a concession operator and concession provider joined by a service concession arrangement.
• SIC 32 Intangible Assets – Website Costs
  Addresses accounting for costs associated with the development of a website.

UK reduced disclosures – FRS 101

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 for FRS 101 preparers

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 for FRS 101 preparers

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, and
• the requirement to disclose proceeds and cost included in profit or loss from the sale of items produced before an item of property, plant and equipment is in the location and condition necessary for it to be able to operate in the manner intended.

IAS 16 paragraphs for which exemption is available: 73(e) (comparative period only), 74A(b).

Other resources

Factsheets

• 2022 IFRS Accounts
  Provides more information about Property, Plant and Equipment: Proceeds before Intended Use

This page was last updated 30 August 2022.