SPD 3218 Intermediate Accounting 1
Lesson 5: Property, Plant and Equipment
and investment Property
Lesson 5: Property, Plant and Equipment and
investment Property
• HKAS 16 PPE
– Initial Recognition and Measurement
– Exchange of Assets
– Subsequent Costs and Subsequent Measurement
• HKAS 40 Investment Property
– Initial Recognition and Measurement
– Subsequent Measurement
• Appendix
– Depreciation Methods
2
Property, Plant and Equipment
•
Tangible assets
Mode of usage
Property, Plant and
Equipment
(HKAS 16)
Assets held for sale
(HKFRS 5)
•
Abandoned assets
(HKFRS 5)
•
Per HKAS 16, PPE are tangible assets that are
held by an entity
– for use in the production or supply of goods or
services,
– for rental to others, or
– for administrative purposes (mode of usage)
and
expected to be used during more than one period
(term of holding).
PPE includes land, land improvements, buildings,
equipment, machinery and motor vehicles.
HKAS 16 does not apply to:
– Biological assets related to agricultural
activity
– Mineral rights and mineral reserves, e.g. oil,
gas and timber
3
Initial Recognition and Measurement
•
As with all assets, recognition depends on two criteria:
– It is probable that future economic benefits associated with the item will flow
to the entity and
Recognition Criteria
– The cost can be measured reliably.
•
PPE (purchased or self-constructed) is initially record at cost with three components:Purchase Price
includes non-refundable import duties and
purchase taxes but excludes trade discount and
rebate
Directly
Attributable Cost
bringing the asset to working condition for
intended use, e.g. costs related to site preparation,
professional fees, testing, construction and
installation.
Dismantling Cost
initial estimate costs of dismantling and removing
the item and restoring the site on which it is
located, e.g. estimated cost of removing unwanted
structure...