Property, plant and equipment – tangible assets held for use in the production or supply of
goods and services, for rental to others and for administrative purposes, which are expected to
be used for more than one accounting period. Such assets are classified as non-current assets
on the statement of financial position.
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Depreciation – the systematic allocation of the depreciable amount (cost less residual value)
of a tangible non-current asset over its useful life.
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Useful life – the period over which a tangible non-current asset is expected to be available for
use, or the number of production units expected to be obtained from the tangible non-current
asset.
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Residual value – the estimated amount the entity expects to obtain for a tangible non-current
asset at the end of its useful life, after deducting the estimated costs of disposal.
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Fair value – the amount for which an asset could be exchanged between knowledgeable,
willing parties in an arm’s length transaction. The fair value of a tangible non-current asset is
normally its open market value.
•
Carrying amount – the amount at which a tangible non-current asset is recognised in the
statement of financial position, after deducting any accumulated depreciation or accumulated
impairment losses.
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Impairment loss – is the amount by which the carrying amount of an asset exceeds its
recoverable amount.
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Recoverable amount – is the amount which is higher of an asset’s fair value less costs to sell,
and its value in use.
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Value in use – is the present value of the future cash flows expected to be derived from an
asset.
Recognition of the tangible non-current asset in the financial statements
The standard states that an item of property, plant and equipment is to be recognised in the financial
statements when:
•
it is probable that future economic benefits associated with the asset will flow to the entity, and
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the cost of the asset can be measured reliably.
International Accounting Standards
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Initial costs associated with the tangible non-current asset
The standard provides that the following can be
