Indian Accounting Standard (Ind AS)
16 Property, Plant and Equipment
Objective 1. The objective of this
Standard is to prescribe the
accounting treatment for property,
plant and equipment so that users of
the financial statements can discern
information about an entitys
investment in its property, plant and
equipment and the changes in such
investment. The principal issues in
accounting for property, plant and
equipment are the recognition of the
assets, the determination of their
carrying amounts and the
depreciation charges and impairment
losses to be recognised in relation to
them.
Scope 2. This Standard shall be applied in accounting for
property, plant and equipment except when another Standard
requires or permits a different accounting treatment. 3. This
Standard does not apply to: (a) property, plant and equipment
classified as held for sale in accordance with Ind AS 105 Noncurrent Assets Held for Sale and Discontinued Operations; (b)
biological assets related to agricultural activity (See Ind AS 41,
Agriculture1 ); (c) the recognition and measurement of
exploration and evaluation assets (see Ind AS 106 Exploration for
and Evaluation of Mineral Resources); or (d) mineral rights and
mineral reserves such as oil, natural gas and similar nonregenerative resources. However, this Standard applies to
property, plant and equipment used to develop or maintain the
assets described in (b)(d). 4. Other Indian Accounting Standards
may require recognition of an item of property, plant and
equipment based on an approach different from that in this 1
Indian Accounting Standard (Ind AS ) 41, Agriculture, is under
formulation. 2 Standard. For example, Ind AS 17 Leases requires
an entity to evaluate its recognition of an item of leased property,
plant and equipment on the basis of the transfer of risks and
rewards. However, in such cases other aspects of the accounting
treatment for these assets, including depreciation, are prescribed
Definitions 6. The following terms are used in this Standard with the
meanings specified: Carrying amount is the amount at which an asset
is recognised after deducting any accumulated depreciation and
accumulated impairment losses. Cost is the amount of cash or cash
equivalents paid or the fair value of the other consideration given to
acquire an asset at the time of its acquisition or construction or, where
applicable, the amount attributed to that asset when initially
recognised in accordance with the specific requirements of other
Indian Accounting Standards, eg Ind AS 102 Share-based Payment.
Depreciable amount is the cost of an asset, or other amount
substituted for cost, less its residual value. Depreciation is the
systematic allocation of the depreciable amount of an asset over its
useful life. Entity-specific value is the present value of the cash flows
an entity expects to arise from the continuing use of an asset and from
its disposal at the end of its useful life or expects to incur when
settling a liability. Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arms length
transaction. An impairment loss is the amount by which the carrying
amount of an asset exceeds its recoverable amount. Property, plant
and equipment are tangible items that: (a) are held for use in the
production or supply of goods or services, for rental to others, or for
administrative purposes; and (b) are expected to be used during more
than one period. Recoverable amount is the higher of an assets fair
Recognition 7. The cost of an item of property, plant and equipment shall be
recognised as an asset if, and only if: (a) it is probable that future economic
benefits associated with the item will flow to the entity; and (b) the cost of
the item can be measured reliably. 8. Spare parts and servicing equipment
are usually carried as inventory and recognised in profit or loss as consumed.
However, major spare parts, stand-by equipment and servicing equipment
qualify as property, plant and equipment when an entity expects to use them
during more than one period.. 9. This Standard does not prescribe the unit of
measure for recognition, ie what constitutes an item of property, plant and
equipment. Thus, judgement is required in applying the recognition criteria to
an entitys specific circumstances. It may be appropriate to aggregate
individually insignificant items, such as moulds, tools and dies, and to apply
the criteria to the aggregate value. 10. An entity evaluates under this
recognition principle all its property, plant and equipment costs at the time
they are incurred. These costs include costs incurred initially to acquire or
construct an item of property, plant and equipment and costs incurred
subsequently to add to, replace part of, or service it.
Recognition 7. The cost of an item of property, plant and
equipment shall be recognised as an asset if, and only if: (a) it is
probable that future economic benefits associated with the item
will flow to the entity; and (b) the cost of the item can be
measured reliably. 8. Spare parts and servicing equipment are
usually carried as inventory and recognised in profit or loss as
consumed. However, major spare parts, stand-by equipment and
servicing equipment qualify as property, plant and equipment
when an entity expects to use them during more than one
period.. 9. This Standard does not prescribe the unit of measure
for recognition, ie what constitutes an item of property, plant and
equipment. Thus, judgement is required in applying the
recognition criteria to an entitys specific circumstances. It may
be appropriate to aggregate individually insignificant items, such
as moulds, tools and dies, and to apply the criteria to the
aggregate value. 10. An entity evaluates under this recognition
principle all its property, plant and equipment costs at the time
they are incurred. These costs include costs incurred initially to
acquire or construct an item of property, plant and equipment
and costs incurred subsequently to add to, replace part of, or
service it.
Measurement after recognition
. An entity shall choose either the cost model in paragraph
30 or the revaluation model in paragraph 31 as its accounting
policy and shall apply that policy to an entire class of
property, plant and equipment. 8 Cost model 30. After
recognition as an asset, an item of property, plant and
equipment shall be carried at its cost less any accumulated
depreciation and any accumulated impairment losses.
Revaluation model 31. After recognition as an asset, an item
of property, plant and equipment whose fair value can be
measured reliably shall be carried at a revalued amount,
being its fair value at the date of the revaluation less any
subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations shall be made
with sufficient regularity to ensure that the carrying amount
does not differ materially from that which would be
determined using fair value at the end of the reporting period.
32. The fair value of land and buildings is usually determined
from market-based evidence by appraisal that is normally
undertaken by professionally qualified valuers. The fair value
of items of plant and equipment is usually their market value
determined by appraisal. 33. If there is no market-based
evidence of fair value because of the specialised nature of the
item of property, plant and equipment and the item is rarely
Measurement after recognition 29. An entity shall choose either
the cost model in paragraph 30 or the revaluation model in
paragraph 31 as its accounting policy and shall apply that policy
to an entire class of property, plant and equipment. 8 Cost model
30. After recognition as an asset, an item of property, plant and
equipment shall be carried at its cost less any accumulated
depreciation and any accumulated impairment losses. Revaluation
model 31. After recognition as an asset, an item of property, plant
and equipment whose fair value can be measured reliably shall be
carried at a revalued amount, being its fair value at the date of
the revaluation less any subsequent accumulated depreciation
and subsequent accumulated impairment losses. Revaluations
shall be made with sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be
determined using fair value at the end of the reporting period. 32.
The fair value of land and buildings is usually determined from
market-based evidence by appraisal that is normally undertaken
by professionally qualified valuers. The fair value of items of plant
and equipment is usually their market value determined by
appraisal. 33. If there is no market-based evidence of fair value
because of the specialised nature of the item of property, plant
and equipment and the item is rarely sold, except as part of a
continuing business, an entity may need to estimate fair value
Indian Accounting Standard (Ind AS)
16 Property, Plant and Equipment
Objective 1. The objective of this
Standard is to prescribe the
accounting treatment for property,
plant and equipment so that users of
the financial statements can discern
information about an entitys
investment in its property, plant and
equipment and the changes in such
investment. The principal issues in
accounting for property, plant and
equipment are the recognition of the
assets, the determination of their
carrying amounts and the
depreciation charges and impairment
losses to be recognised in relation to
them.
Scope 2. This Standard shall be applied in accounting for
property, plant and equipment except when another Standard
requires or permits a different accounting treatment. 3. This
Standard does not apply to: (a) property, plant and equipment
classified as held for sale in accordance with Ind AS 105 Noncurrent Assets Held for Sale and Discontinued Operations; (b)
biological assets related to agricultural activity (See Ind AS 41,
Agriculture1 ); (c) the recognition and measurement of
exploration and evaluation assets (see Ind AS 106 Exploration
for and Evaluation of Mineral Resources); or (d) mineral rights
and mineral reserves such as oil, natural gas and similar nonregenerative resources. However, this Standard applies to
property, plant and equipment used to develop or maintain
the assets described in (b)(d). 4. Other Indian Accounting
Standards may require recognition of an item of property,
plant and equipment based on an approach different from that
in this
Scope 2. This Standard shall be
applied in accounting for property,
plant and equipment except when
another Standard requires or permits
a different accounting treatment. 3.
This Standard does not apply to: (a)
property, plant and equipment
classified as held for sale in
accordance with Ind AS 105 Noncurrent Assets Held for Sale and
Discontinued Operations; (b)
biological assets related to
agricultural activity (See Ind AS 41,
Agriculture1 ); (c) the recognition and
measurement of exploration and
evaluation assets (see Ind AS 106
Exploration for and Evaluation of
Mineral Resources); or (d) mineral
rights and mineral reserves such as
oil, natural gas and similar nonregenerative resources. However, this
Standard applies to property, plant
and equipment used to develop or
maintain the assets described in (b)
