Chapter 11 –Non-current assets: Property, plant and
equipment, and intangibles
In Chapter 9, you were introduced to the principles of internal control. In Chapters 6, 9, and 10, you
saw how companies maintain control over three very important current assets: inventories, cash and
receivables. In this chapter, we continue the discussion of internal control with specific application to
non-current assets, sometimes called long-term assets. Non-current assets include tangible assets such
as equipment, buildings, natural resources, and intangible assets (without physical form). The
learning objectives for the chapter are to:
Measure the cost of a non-current asset
Account for depreciation
Select the best depreciation method for income tax purposes
Account for the disposal of a non-current asset
Account for the revaluation of a non-current asset
Account for intangible assets
Objective 1 - Measure the cost of a non-current asset.
Business assets are classified as current or non-current. Current assets are considered to be useful for
one year or less. Non-current assets are expected to be useful longer than a year. Plant and equipment
(also called depreciable assets) are long-term assets; the business uses their service potential over a
number of years. Property, plant and equipment are tangible assets; that is, they have physical form.
The cost of a plant, property and equipment (under AASB 116
Property, Plant and Equipment
the purchase price plus any other amount paid to acquire it and make it ready for use.
cost of land
includes the purchase price, brokerage commission, survey fees, legal fees,
government stamp duty, costs to clear the land, and costs to demolish or remove any unwanted
buildings, but not costs like new fences or upgrading the irrigation system. These are known as
and are separate depreciable assets.
cost of buildings
includes the purchase price, taxes, and any expenditure to repair or renovate
the building to make it ready for use. The cost of constructing a building includes all fees, labour and
materials and may
include interest on money borrowed while
the building is being constructed
cost of machinery and equipment
includes the purchase price, transportation charges,
transportation insurance, commissions, and installation and testing costs.
The cost of improvements to leased assets is called
and should be
depreciated over the lease period.
When a company purchases a group of assets for one single amount (also known as a
), the total cost of the assets is allocated to individual assets
(according to the previous accounting standard AASB 1015, but not covered in the current standard
Non-current assets: Property plant and equipment, and intangibles