3) ppe - 3) Property, Plant and Investment What is PPE? IAS...

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3) Property, Plant and Investment What is PPE? IAS 16 Property, Plant and Equipment defines PPE as tangible assets that are: held by an entity for use in the production or supply of goods and services, for rental to others or for administrative purposes expected to be used during more than one period, i.e. only non-current assets can be classified as PPE An asset that was classified as PPE but is now going to be sold should be classified separately as an ‘asset for sale’ according to IFRS 5. The same asset can be PPE for one company but inventory for another. If the item is a current asset then it should be treated according to IAS 2 Inventories . Some companies will only classify assets as PPE if they exceed a certain value, otherwise they are expensed through the income statement. Cost of PPE IAS 16 Property, Plant and Equipment states that the cost of PPE comprises: The purchase price, including import duties and non-refundable purchase taxes The costs attributable to bringing the asset to working condition for its intended use which include the costs of site preparation, initial delivery and handling costs, installation costs and professional fees The initial estimate of the cost to dismantle and remove the asset and restore the site on which it is located Borrowing Costs IAS 23 Borrowing Costs states that borrowing costs should normally be expensed in the period in which they were incurred. There are a number of potential problems in the capitalisation of borrowing costs: It can be difficult to identify specific borrowings with specific profits It could be inappropriate to say that the cost of an asset financed by borrowings is different
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This note was uploaded on 02/25/2012 for the course CHEM 4385 taught by Professor Staff during the Fall '11 term at Texas State.

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3) ppe - 3) Property, Plant and Investment What is PPE? IAS...

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