These are tangible items which they will use for their production or supply of goods or services for rental to others, or for administrative purposes. And it is expected to be used during more than one period. IAS 16 states that the cost of an item of property, plant and equipment shall be recognized as an asset if, and only if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.
The cost of property plant and equipment will be recorded after deducting the trade discount, taxes and rebates.
IAS 16 applies in accounting for property plant and equipment except when another Standard requires or permits a different accounting treatment
It does not apply to: –
- property, plant and equipment classified as held for sale (IFRS 5)
- biological assets related to agricultural activity (IAS 41)
- the recognition and measurement of exploration and evaluation assets (IFRS 6) mineral rights or reserves such as oil and natural gas, but does apply to Property plant and equipment used to develop or maintain the assets described above.