Accounting for Property, plant and equipment (PPE), International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),

International Financial Reporting Standards (IFRS)
International Accounting Standards (IAS)

U.S. GAAP

IFRS, IAS

Accounting Topics

IFRS Accounting
Property, Plant and Equipment (PPE)

IFRS Dictionary, IFRS, IAS Timeline, IFRS Hedge Accounting

U.S. GAAP by Topic, IFRS, IAS by Topic, Accounting by Topic

International Financial Reporting Standards (IFRS)

IFRS Accounting: Property, Plant and Equipment (IAS 16)

Initial measurement:
At the time of initial recognition,
--> Property, plant and equipment are measured at cost.

Measurement after initial recognition:
After initial recognition, entities can choose either cost model or revaluation model.

[Checking point]
After initial recognition, inventories are measured
--> at the lower of cost or net realisable value (NRV).

After initial recognition,
--> property, plant and equipment are measured using one of the following methods:
--> cost model or revaluation model.

U.S. GAAP:
After initial recognition, property, plant and equipment are measured
--> using cost model.

Cost model:
   Carrying amount is:
   --> cost - (A) -(B)
   --> (A) = accumulated depreciation
   --> (B) = accumulated impairment losses
   --> asset impairment is covered by IAS 36

Revaluation model:
   Carrying amount is:
   --> fair value at the date of revaluation - (A) -(B)
   --> (A) = accumulated depreciation since revaluation date
   --> (B) = accumulated impairment losses since revaluation date

Increase in carrying amount:

   If the fair value > carrying amount, at revaluation date
   --> carrying amount is increased to fair value

   the amount of increase in carrying amount due to revaluation:
   --> called revaluation surplus
   --> recognized in other comprehensive income
   --> accumulated in equity section

   revaluation surplus is transferred to retained earnings,
   --> when the asset is derecognised.

Decrease in carrying amount:

   If the fair value < carrying amount, at revaluation date
   --> carrying amount is decreased to fair value

   the amount of decrease in carrying amount due to revaluation:
   --> first, decreases revaluation surplus (accumulated in equity section)

   after reducing the revaluation surplus to zero:
   --> additional decrease is recognized in profit or loss

(Q1) What if the carrying amount of PPE is smaller than fair value at revaluation date?

(Q2) When does the revaluation surplus accumulated in equity section decrease?

IFRS Accounting for Assets