Property, plant and equipment

Property, plant and equipment are tangible assets held by an anterprise for more than one accounting period for use in the production or supply of goods or services, for rental to others, or for administrative purposes.

It is probable that future economic benefits associated with the asset will flow to the enterprise; and the cost of the asset can be measured reliably.

The initial measurement of the value of a tangible non-current asset should be cost or, if the asset was obtained by an exchange, fair value at the time of the exchange.

The useful life of assets should be periodically reviewed, and if they have changed materially the depreciation charge should be adjusted. The factors to be considered in determining useful life are:

1. rate of usage
2. epected wear and tear
3. technical obsolescence
4. legal or other limits on the use of the asset, such as the expiry of a lease.

Load normally has an unlimited life and so does not require depreciation, but bulidings should be depreciated.

There are seveal methods of calcuating depreciation, the methods are:

1. straight line method
2. reducing balance method
3. sum of the digits method
4. revaluation method.

In the financial statements, each major class of depreciable asset should be disclosed:

1. the measurement base used (e.g cost or revaluation)
2. the depreciation methods used
3. the useful lives or the depreciation rates used
4. total depreciation charged for the period
5. the gross amount of depreciable assets and the related accumulated depreciation.

We’ll discuss all the detailed of the property, plant and equipment later.

Related posts:

1. Revaluation method
2. Methods of calcuating depreciation
3. Non-current assets and depreciation
4. Straight line method of depreciation
5. Depreciation inventory