IAS 16
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Governments awards an amount to a entity
specifically for the purchase of an asset
Government grant is recognised as either:
◦ Deferred income; or
◦ By deducting the grant in arriving at the carrying
amount of the asset
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Repayment of government grant accounted
for as a change in accounting estimate
Grants relating to income to be presented
separately as ‘other income’
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Same recognition principles
Excludes day-to-day servicing of the asset
(recognise as an expense)
Asset acquired in state of disrepair –
subsequent expenditure to restore the item
to be capitalised
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Each item of PPE depreciated separately
Depreciable amount allocated on a systematic
basis over the item’s useful life
Depreciable amount is determined after
deducting the residual value
Depreciation charge recognised as an
expense, unless it is included in the carrying
amount of another asset (entity uses one
asset to construct another asset)
Depreciation begins when the item is
ready/available for use
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Depreciation ceases when the asset is
classified as held for sale & derecognised
Useful life is estimated after considering:
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Expected usage
Expected physical wear & tear
Technical or commercial obsolescence
Legal or similar limits on the use of the asset
Land usually not depreciated
Buildings are depreciated because they have a
limited life
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Depreciation methods selected based on the
expected pattern of consumption of future
economic benefits embodied in the asset
Depreciation method is to be reviewed at least
annually at the financial year-end
Change in depreciation method = change in
accounting estimate = only current & future
periods are adjusted (prospective adjustment)
Useful life & residual value to be reviewed at least
once a year at the financial year-end
Depreciation does not cease when asset becomes
temporarily idle, unless classification of asset
changes to ‘held for sale’
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Fair value – price that would be received to
sell an asset in an orderly transaction
between market participants at the
measurement date
Carrying amount – amount at which asset is
recognised after deducting any accumulated
depreciation & accumulated impairment
losses
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PPE measured at revalued amount less
subsequent accumulated depreciation &
accumulated impairment losses
Frequency of revaluations varies depending
on volatility of changes in fair value
Class of PPE can be carried under this model
only if fair value can be measured reliably
Item revalued – entire class to which asset
belongs shall be revalued.
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Item of PPE to be derecognised upon disposal
Gains or losses on disposal – difference
between the disposal proceeds and the
carrying amount of the asset & included in
profit or loss for the period
Disposal proceeds measured at fair value of
consideration received
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PPE presented as separate line item in SOFP
Accounting policies note
◦ Depreciation methods for each class of PPE
◦ Useful lives of each class of PPE
◦ Accounting policy adopted for government grants
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Note to profit & loss for the year:
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Gain or loss on disposal
Impairment loss
Depreciation allocated by class of PPE
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Note to PPE (per class of assets):
◦ Measurement basis (historical cost or revaluation)
◦ Cost & accumulated depreciation at the beginning &
end of the period
◦ Reconciliation of carrying amount at the beginning
and end of the period
 Additions
 Assets classified as held for sale
 Increases/decreases resulting from revaluations &
impairments
 Impairment losses
 Depreciation
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Restrictions on title
Expenditures capitalised during construction
Revalued items of PPE:
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Date of revaluation
Whether or not an independent valuator was used
The depreciated historic cost of each revalued class
Revaluation Reserve (statement of changes in
equity) – detailing movements for the period