PROPERTY, PLANT AND
EQUIPMENT
(PPE)
STRUCTURE
Recognition of an asset
 Changes
 Classification of property, plant and equipment
 Depreciation

RECOGNITION AS AN ASSET
•It is probable that the future economic benefits or
service potential associated with the item will
flow to the entity
•Cost or Fair Value of the items can be measured
reliably
CHANGES
SOME PRINCIPAL DIFFERENCES BETWEEN UNSAS AND IPSAS
United Nations System Accounting
Standards (UNSAS)
•
•
•
•
•
PPE is not capitalized and not
subject to depreciation (PPE
expensed when purchase order “PO”
is issued);
Entities disclose the total value of
PPE at original acquisition cost in
the Notes;
Most “self constructed assets” are
not tracked;
Major overhauls (substantial
improvements) to assets are
expensed as incurred;
Impairment losses are not
recognised when they occur (since
PPE items are expensed on
purchase)
IPSAS
•
•
•
•
PPE is capitalized and depreciated
over useful live (commitments for
acquisition of PPE (POs) disclosed in
the Notes);
Costs related to “Self constructed
assets” should be tracked and
capitalized if asset recognition
criteria is met;
Major overhauls (substantial
improvements) to assets are
capitalized;
Impairment losses are recognised in
the period they occur;
CLASSES OF UN PROPERTY, PLANT AND
EQUIPMENT
A Class of property, plant and equipment is a grouping of assets of a
similar nature or function in an entity’s operations that is shown
as a single item for the purpose of disclosure in the Notes to the
financial statements.
Property, Plant and Equipment
Vehicles
Communication and
IT Equipment
Furniture &
Fixtures
Surveillance/Control
Equipment
Asset
1
Asset
2
Asset
3
…
Asset
n
Leasehold
Improvements
Telecommunication
Equipment
Buildings
…
Land
Category
n
INTANGIBLE ASSETS
Two main characteristics
Lack physical existence
 Are not financial instruments

Some Examples





Patents
Software
Copyright
Franchises/licenses
Trademarks
Intangible asset: ”an
identifiable non-monetary asset
without asset without physical
substance”
Conditions:
•Must be identifiable
•Will provide future
economic benefits
•Benefits are controlled
CHANGES IN ACCOUNTING
AND REPORTING
POLICIES
INITIAL ADOPTION
Decisions on accounting and reporting policies
 Determining capitalisation threshold and policies on asset groupings
 Setting policies on expensing or capitalising subsequent expenditure
 Developing impairment policies
 Identifying useful lives within approved ranges for all types of PPE
 Deciding useful lives of asset components (e.g. plumbing and heating
system of a building)
 Identifying situations of control over shared assets
 Determining if further classes are needed for disclosure and respective
lives
 Deciding how to measure beginning balances (cost or fair value)
An entity that adopts accrual accounting for the first time in
accordance with IPSAS shall initially recognise PPE at:
Cost
Fair value
…or…
DEPRECIATION
Depreciation is the systematic allocation of the depreciable amount of an
asset over its useful life. All Items of PPE, except land, have limited useful
lives. Because of this limited useful life, the costs of these assets must be
distributed as expenses over the years they benefit.
Value
Initial Cost
Depreciation
Decline in service potential
UN System wide
Recommended
Accounting Practice is
to use years as the
measurement
parameter for
depreciation.
Time
Acquisition
Initial cost
Useful life
Disposal
Residual value
Depreciation is the result of an allocation, not a valuation
process. The term is used to describe the gradual conversion of the costs of
the asset into an expense.
PPE & INTANGIBLE ASSETS
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