📖 Overview
This standard addresses accounting treatment for property, plant and equipment, including recognition, measurement (using cost model or revaluation model), depreciation, impairment testing, and derecognition. Fixed assets are systematically depreciated over their useful lives.
🎯 Scope
This standard applies to the accounting treatment for property, plant and equipment (fixed assets), except:
- Assets classified as "held for sale" (IFRS 5).
- Biological assets (IAS 41).
- Mineral rights and natural resources (typically under IFRS 6).
- Investment property (IAS 40).
⚙️ Key Principles
1. **Initial Recognition**: A fixed asset is recognized when:
- It is probable that future economic benefits will flow to the entity.
- The cost can be measured reliably.
2. **Subsequent Measurement**: Two options:
- **Cost Model**: Cost - Accumulated Depreciation - Impairment Losses.
- **Revaluation Model**: Fair Value - Subsequent Accumulated Depreciation.
3. **Depreciation**: Systematic allocation of the asset's cost (or revalued amount) over its useful life.
4. **Impairment**: Assets are tested for impairment under IAS 36.
📏 Measurement
**Cost includes:**
- Purchase price (after deducting trade discounts).
- Transportation, installation, and commissioning costs.
- Dismantling and site restoration costs (future obligations).
- Borrowing costs (if asset is qualifying).
**Cost excludes:**
- Day-to-day maintenance costs.
- Training costs.
- Initial operating losses.
**Revaluation:** Revaluations are performed regularly; increases are recorded in OCI and decreases are recognized in profit or loss.
✅ Recognition
Fixed assets are recognized when acquired or constructed. Subsequent costs (maintenance, repairs) are recognized as expenses in the income statement, unless they increase the future economic benefits of the asset (improvements, expansions, extended useful life), in which case they are capitalized as part of the asset's cost.
📊 Presentation
Fixed assets are presented on the Statement of Financial Position within non-current assets. Accumulated depreciation is shown as a deduction from asset cost. The notes disclose:
- Depreciation methods used.
- Useful lives or depreciation rates.
- Gross carrying amount and accumulated depreciation.
- Reconciliation of fixed assets movement during the period (note disclosure).
📝 Disclosure Requirements
Disclosures required:
- Measurement bases used (cost or revaluation).
- Depreciation methods and useful lives.
- Gross carrying amount and accumulated depreciation by asset class.
- Reconciliation of changes in assets (additions, disposals, depreciation, impairment, revaluation).
- Restrictions on asset ownership (pledges, guarantees).
- Contractual commitments to purchase fixed assets.
🔗 Related Standards
IAS 36 (Impairment of Assets), IAS 20 (Government Grants), IAS 23 (Borrowing Costs), IFRS 5 (Non-current Assets Held for Sale)