Property, plant and equipment (PPE) are all tangible assets (for example- Computer, Furniture, Motor Vehicle, Buildings, etc….). These assets should have useful life more than one year. Not the purpose of resale and only for used in production or office administration purpose.
PPE should be measured initially at cost. This costs included purchase cost and direct attributable cost (example – transportation cost, custom duty, site preparation cost).
Subsequent period, the entity can choice two model: (1) Cost Model (2) Revaluation model
(1) Cost model: Cost – Accumulated Deprecation – Accumulated Impairment
(2) Revaluation model: Revalue amount – Accumulated depreciation – Accumulated Impairment
When PPE are ready for use, depreciation should be calculated. The following depreciation methods can be used:
- Straight line method
- Reducing balance method
- Output unit method
When the entity choose revaluation model, The entity should be revalued the PPE regularly.
When the PPE sold off, gain or loss on disposal should be calculated and recognized in profit or loss.
The entity should maintain fixed assets register enable to control physical of PPE. To protect from loss or thief of assets, labeling the asset code on the asset and should count at least once a year.
The entity should review the condition of assets whether assets are impair or not.