What are the recognition criteria for property plant and equipment?

Asked By: Donatas Jinkin | Last Updated: 14th June, 2020
Category: real estate real estate renting and leasing
5/5 (61 Views . 36 Votes)
IAS 16 states that the cost of an item of property, plant and equipment shall be recognized as an asset if, and only if:
  • it is probable that future economic benefits associated with the item will flow to the entity; and.
  • the cost of the item can be measured reliably.

Click to see full answer


Similarly, what is the recognition criteria for assets?

Assets: An asset is recognized in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably. The economic benefits contribute, directly or indirectly, in the form of cash or cash equivalents.

Likewise, what is IAS 16 Property plant and equipment? IAS 16 applies to property, plant and equipment (PPE). The standard itself defines PPE 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 [accounting] period."

Subsequently, one may also ask, what is classified as property plant equipment?

Property, plant, and equipment (PP&E) are a company's physical or tangible long-term assets that typically have a life of more than one year. Examples of PP&E include buildings, machinery, land, office equipment, furniture, and vehicles. Companies list their net PP&E on their financial statements.

How is an impairment loss on property plant and equipment determined and measured under IFRS?

Under IAS 36, an impairment loss arises when an assets recoverable amount is less than CV; where recoverable amount is the greater of net selling price & value in use.

38 Related Question Answers Found

What are the four criteria for revenue recognition?

The staff believes that revenue generally is realized or realizable and earned when all of the following criteria are met:
  • Persuasive evidence of an arrangement exists,3
  • Delivery has occurred or services have been rendered,4
  • The seller's price to the buyer is fixed or determinable,5
  • Collectibility is reasonably assured.

What are the 3 types of assets?

Common types of assets include: current, non-current, physical, intangible, operating, and non-operating.

What Are the Main Types of Assets?
  • Cash and cash equivalents.
  • Inventory.
  • Investments.
  • PPE (Property, Plant, and Equipment)
  • Vehicles.
  • Furniture.
  • Patents (intangible asset)
  • Stock.

Is a car an asset?

The short answer is yes, generally, your car is an asset. But it's a different type of asset than other assets. Your car is a depreciating asset. Your car loses value the moment you drive it off the lot and continues to lose value as time goes on.

When should an expense be recognized?

The expense recognition principle states that expenses should be recognized in the same period as the revenues to which they relate. If this were not the case, expenses would likely be recognized as incurred, which might predate or follow the period in which the related amount of revenue is recognized.

What are the recognition criteria for liabilities and expenses?


A liability is recognized in the balance sheet when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably.

How do you measure assets?

Financial instruments are measured at either fair value or amortized cost. Financial assets are measured at amortized cost if the entity intends to hold the financial asset until maturity and the asset's cash flows will occur on specified dates and consist of principal and interest payments only.

What is recognition in financial reporting?

Recognition is the process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the following criteria for recognition: [F 4.37 and F 4.38] It is probable that any future economic benefit associated with the item will flow to or from the entity; and.

What is the difference between recognition and disclosure in accounting?

Previously documented differences in how capital market participants use recognized and disclosed items (e.g., Ahmed 1 Recognition refers to items included in subtotals on the face of financial statements, while disclosure refers to items that appear in words, numbers, or descriptions in the footnotes of financial

Why is property plant and equipment important?

What is the definition of property, plant, and equipment? The PP and E account is important for the operations of a firm because it gives the company the resources necessary to produce its products. The value of PP&E depends on its age and original cost.

What is the mean of equipment?


Equipment consists of the things which are used for a particular purpose, for example a hobby or job. computers, electronic equipment and machine tools.

Is equipment a current asset?

Equipment is not considered a current asset. Instead, it is classified as a long-term asset. Equipment is not considered a current asset even when its cost falls below the capitalization threshold of a business.

Is land a plant asset?

Land, machinery, computers, buildings, and office equipment are examples of plant assets. To be classified under this category, an asset should have a useful life of more than one year.

Is property plant and equipment a current asset?

Current assets include items such as cash, accounts receivable, and inventory. Property, plant, and equipment - which may also be called fixed assets - encompass land, buildings, and machinery including vehicles. Finally, intangible assets are goods that have no physical presence.

How do you calculate property plant and equipment?

To calculate net PP&E, you take gross PP&E, add related capital expenses and subtract depreciation. Gross PP&E is the total cost you paid for all the assets at the start of the balance-sheet period. If your buildings, equipment and vehicles cost you a total of $1.2 million, that's your starting point.

What are some examples of long term liabilities?


Examples of long-term liabilities are bonds payable, long-term loans, capital leases, pension liabilities, post-retirement healthcare liabilities, deferred compensation, deferred revenues, deferred income taxes, and derivative liabilities.

What are examples of intangible assets?

Examples of intangible assets include goodwill, brand recognition, copyrights, patents, trademarks, trade names, and customer lists. You can divide intangible assets into two categories: intellectual property and goodwill.

Is land depreciated?

Land is not depreciated because land is assumed to have an unlimited useful life. Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the costs of those assets must be allocated to those limited accounting periods.