IAS 16 Property, Plant and Equipment
IAS 16 sets out the accounting for property, plant and equipment (PP&E): tangible assets held for use in production, supply of goods or services, rental to others, or administrative purposes, and expected to be used for more than one period.
Related Standards
Explanation
Key requirements:
• Initial measurement at cost, including directly attributable costs to bring the asset to working condition.
• Subsequent measurement using either the cost model or the revaluation model.
• Depreciation over the useful life, with significant components depreciated separately.
• Derecognition on disposal or when no future benefits are expected.
The US GAAP guidance is found mainly in ASC 360.
Why It Matters
For lessors, assets leased out under operating leases remain on the balance sheet and are depreciated under IAS 16. When a lease is classified as a finance lease, the asset is derecognized instead. Equipment businesses therefore need a clear link between lease classification, asset accounting, and depreciation – across contract start, modifications, and returns of equipment.
Related Terms
Operating Lease · Finance Lease · IAS 36 · IAS 23 · SAP Asset Accounting (FI-AA)
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