Property,Plant & Equipment (IAS -16)

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )   (9017 Points)

19 June 2009  

 

What is PPE :-   IAS-16 defines as “ tangible items that
§  are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
§  are expected to be used during more than one period”
   The spare parts and servicing equipment are normally treated as inventory and expensed as consumed. But major spare parts and stand by equipment treated as PPE, when they are expected to be used during more than one period.
   All those components which has a cost that is significant in relation to the total cost of the item, must be depreciated separately.
   This does not mean that these significant component have different useful lives or provide a different pattern of benefits to the entity than the main asset.
   Example:-    An aircraft and its engines may need to be treated as separate depreciable assets and this will be required if they have different useful life.