1. Property, Plant and Equipment
Ind AS-16
Property, Plant and Equipment by
CA, D.S. Rawat
Partner, Bansal & Co.

2. Property, Plant & Equipment [PPE]
PPE are tangible assets that :
are held for use
expected to be used more than one period

3. What it covers Recognition of asset carrying amount Depreciation
Impairment

4. Measurement at recognition
Measure the items of PPE at initial recognition at its Cost.

5. Elements of cost Purchase price
Costs directly attributable to bringing the asset to the location & condition
Initial estimate of the costs of dismantling & removing the items & restoring the site on which it is located.

6. Measurement of cost Cash price equivalent at the recognition date
if acquired in exchange for non-monetary asset – at fair value
PPE held by a lessee under finance lease – as per Ind AS-17

7. Cost of dismantling/decommissioning
The elements of cost to be incorporated in the initial recognition of an asset are to include the estimated costs of its eventual dismantlement (‘decommissioning cost’). That is, the cost of the asset is “grossed up” for these estimated terminal costs, with the offsetting credit being posted to a liability account.
It is important to stress that recognition of a liability can only be effected when all the criteria set forth in Ind AS-37 for the recognition in provisions are met.
It seems odd to capitalize decommissioning costs that are not going to emerge until later in the asset’s life. However if there is an obligation as a direct consequence of acquiring or constructing property, plant and equipment to incur further costs in the future that cannot be avoided.

8. Cost of dismantling/decommissioning
A provision is recognized in accordance with Ind AS-37. Therefore, the decommissioning costs at the end of the asset’s life are just as much a cost of acquiring or constructing the asset as the costs incurred at the start of the asset’s life.
Decommissioning or similar costs such as dismantling expenditure can often arise in connection with operating leases and leasehold improvements.

9. Measurement after initial recognition – Accounting policy election
Cost model
Revaluation model

10. Cost Model At cost less Any accumulated depreciation less
Any accumulated impairment losses

11. Revaluation Model Fair value less Subsequent accumulated depreciation
Subsequent accumulated impairment losses

12. Revaluation Model
If an items of PPE is revalued, the entire class of PPE to which that asset belongs shall be revalued.

13. Revaluation increase/ decrease
Increase shall be recognised directly to equity under the heading of revaluation surplus
Decrease shall be recognised to profit or loss

14. Subsequent cost
Cost of day-to-day servicing are primarily repairs & maintenance and recognise in profit & loss as incurred.
Added in carrying amount of PPE if recognition criteria is met

15. Impairment
Whether an item of PPE is impaired, an entity applied Ind AS-36, “Impairment of Assets”

16. Compensation for Impairment
An entity shall include in profit or loss compensation from third parties for items of PPE that were impaired, lost or given up only when the compensation becomes receivable.

17. De-recognition An entity shall de-recognise PPE on disposal
when no future economic benefits are expected from its use or disposal

18. Gain & loss on the recognition
The gain or loss arising from the de-recognition of an item of PPE shall be included in profit or loss
Gain shall not be classified as revenue unless Ind AS-17 requires otherwise on a sale and leaseback

19. Depreciation
Each part of an item PPE with a cost that is significant in relation to the total cost of the item shall be depreciated separately
A Building may be split up into the following components:
Structural design
Elevators
Heating system
Water system
Electrical system

20. Depreciable amount
Allocate the depreciable amount of an asset on a systematic basis over its useful life
Review the residual value and the useful life of an asset at lest at each annual reporting date

21. Depreciation Method
The depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity
The depreciation method applied to an asset shall be reviewed at least at each financial year end
Change shall be accounted for as a change in an accounting estimate in accordance with Ind AS-8
Methods includes the straight-line method, the diminishing balance method and Units of Production method

22. Disclosure Measurement basis for the gross carrying amount
Reconciliation of carrying amount
Useful life, depreciation, depreciation rate
Accumulated depreciation and impairment
Disclosure of revaluation
Other number of disclosures

23. Fair value less cost to sell
Binding sale agreement
Active market
Best estimate based on information

24. Recoverable amount of an individual asset cannot be determined
No impairment loss is recognised for an individual asset if related cash generating unit is not impaired

25. Impairment loss & Deferred tax
If an impairment loss is adjusted in account/financial statement, any related deferred tax assets or liabilities are also to be determined as per Ind AS-12 “Income taxes”

26. Reversal of a impairment loss
Reversal of impairment loss for individual asset other than goodwill
Reversal of impairment loss for cash generating unit
Reversal of impairment loss for goodwill

27. Reversal of a impairment loss for individual asset other than goodwill
Any increase in the carrying amount of an asset above the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognised for the asset in prior years is a revaluation and should be treated accordingly.

28. Reversal of impairment loss for cash generating unit
A reversal of an impairment loss for a cash generating unit should be allocated to increase the carrying amount of the assets (but never to goodwill) pro-rata with the carrying amount of those assets.

29. Reversal of a impairment loss on goodwill
An impairment loss recognised for goodwill cannot be reversed in a subsequent period

30. Disclosures For each class of assets Requirement for segment reporting
Requirement for cash generating unit
Requirement for reversal of impairment loss

31. THANK
YOU
CA, D.S.RAWAT
Partner, BANSAL & Co.