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Implementation of IAS 16 Proprty, PLant and Equipment

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)

28 May 2009

Hi all,

Recently I studied IAS 16 Property, Plant and Equipment.

I found it to be much different from the related AS - 10. So i have created this commitee to discuss about the same as in how to implement this particular standard. I beleive there will be a great deal of problems faced in implementation of the standard.

I hope there will be active participation of the members on their perspective of implementation of the same.

Thanks & Regards,

CA Madhumita Binani.

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26 Replies

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 28 May 2009

As for replacement of the spare parts, it says that capitalised the new one but DERECOGNISE THE OLD ONE. However the IAS does not specifically

The First and most important thing that I noticed was the elaboration of the spare parts.

The IAS says to charge the same to P/L A/c and if the expected usage is more than 1 yr or the same is in sonnection with a single item, it should be capitalized. This point is same as what we are following,

say whether the derecognition is to be done prospectively or retrospectively., but it leans more on the other side(i.e., the retrospective effect).

I wud like to have views of the members in regard to this.

Thanks and regards

CA Madhumita Binani

Sumit Jain (CA) (4760 Points)
Replied 28 May 2009

thanx for sharing

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 30 May 2009

Welcome....

But it is not just sharing my view... also about getting the views of the members...

Regards

CA Madhumita Binani

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 02 June 2009

Hey Madhumita.

What i found major problem.. in the segregation of assets.. because if we are selling assets as a bunch.. or any of the part is available in the market or i can say if any of the parts have there own market.. we need to segregate..

i must say our life will be hell after all this

Amit

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 02 June 2009

Exactly... That is a big problem... and for the big players... they may be holding P&M for very long periods, n must be replacing parts every few years... is it really possible for them to every time segreagate the component price...

Regards

Madhumita

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 02 June 2009

But one thing at the end of the day .. our demand will increase like any thing..hahahhaha

Amit

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 03 June 2009

Dats true... CA is by far the best profession... But still, there are some drawbacks which i think the people are looking upon a lot after the satyam scam....!!!

Any how... the members are requested to keep posting their views on IAS 16...

Thanks & Regards

Madhumita Binani

Isha Gupta (Chartered Accountant) (180 Points)
Replied 03 June 2009

Hello frndz,

I heard that as per IAS 16, a fixed asset is not to be capitalised as a whole rather every component is to be regognised seperately (unlike AS 10). Is it tue?

Dont you think it will lead to a chaos.

Regards

Isha

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 03 June 2009

Yes Isha that is very true... And thats the most important point of convergence to IFRS, as Fixed Asset are a very big oprtion of an entity's assets...!!

Regards

Madhu

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 03 June 2009

Yes Isha that is very true... And thats the most important point of convergence to IFRS, as Fixed Asset are a very big oprtion of an entity's assets...!!

Regards

Madhu

**Portion

Isha Gupta (Chartered Accountant) (180 Points)
Replied 03 June 2009

What are other possible challenges that we are going to face in its compliances. Also guide us about a way out.

CA Madhumita Binani (Executive Accounts (SERVICE)) (389 Points)
Replied 03 June 2009

Also IAS 16 requires Annual Review of the remaining useful life of the assets and its residual value while as in AS 10, it is reviewed as per the management's decision (may or may not be on year-on-year basis...!!

So this also increases the workload on us as well as u auditors...!!

C.A Rohit Gambhir (C.A) (275 Points)
Replied 07 August 2009

Hi,

This is regarding Replacement Cost discussed above at reply 2 above. IAS 16 also provides for Capitalisation of New Cost and derecognition the old one just like AS 10. The issue has been addressed as follows :

This issue was partly addressed by an interpretation of the Standing Interpretations Committee (SIC) that permitted adding major overhaul or inspection costs to the original asset if an amount representing the major overhaul or inspection component of the original cost of the asset was separately identified on initial recognition and was separately depreciated, and thereby could be written out of the asset records.

The current Standard applies the two basic recognition criteria referred to above to all expenditures (and dispenses with the increased utility or increased useful life criteria). If the two basic criteria are satisfied, then the cost should be recognized as an asset. If the cost of the replaced asset was not separately identifiable, then the cost of the replacement can be used as an indication of the cost of the replaced item, which should be removed from the asset record.