IAS 16 PROPERTY, PLANT EQUIPMENT

2. PROPERTY, PLANT & EQUIPMENT Are tangible items that: are held for use in the production or supply of goods or services, for rental to others , or for administrative purposes; and are expected to be used during more than one period.

6. RECOGNITION CRITERIA Recognition criteria laid down by IAS 16 in Para 7: The cost of an item of property, plant and equipment shall be recognised 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.

7. Accordingly following conclusions can be drawn: No unit of measure for recognition is prescribed. Hence, in applying the recognition criteria, entity will apply judgement based on specific circumstances (for example for stores and spares considering whether to apply the criteria to individual item or to the aggregate of such items) As required by the criteria, economic benefits associated with the asset must flow to the entity in future for it to be recognised. In pursuant to this the standard provides that the entity may decide to recognize only those items as PPE which it expects will provide economic benefit for more than one accounting period. Accordingly, spare parts or day to day servicing of an item are recognised as an expense unless spare parts constitutes the major part of the asset. Likewise, major inspections for faults say in aircrafts may be capitalised in the carrying amount as it increases the useful live of the asset the benefit of which will be available for more than one period. It may be possible, economic benefit associated with the asset may not directly flow from the asset, but enable an entity to derive economic benefits from related assets in excess of what could be derived has those items not been acquired. Say, a plant installed to treat harmful residue of production process may not generate any economic benefit from its own self but allows the entity to derive benefits from other assets.

8. Legal ownership of an item of PPE is not necessary, as long as the economic benefits flowing form it are available to the entity for example an item held under finance lease is treated as belonging to the user of the item. Recognition principle can be applied at any time over the life of the item of PPE when expenditure on it is incurred; it is not applied only on the initial acquisition or construction of the item

9. INITIAL MEASUREMENT An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost.

10. MEASUREMENT AFTER RECOGNITION

12. REVALUATION MODEL An item of PPE whose FAIR VALUE CAN BE MEASURED RELIABLY shall be carried at a revalued amount The adoption of revaluation model represents CHANGE IN ACCOUNTING POLICY and should be adopted when this will result in more relevant or reliable information about the enterprise's financial position, performance or cash flows Revaluation model requires application to ENTIRE class of PPE to which the asset belongs Revaluations shall be made with sufficient REGULARITY to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date. Increase in carrying amount of PPE is credited directly to EQUITY under the heading SURPLUS ON REVALUATION Decrease in revaluation is recognised directly in PROFIT AND LOSS or reversed from the SURPLUS ON REVALUATION

13. DEPRECIATION Each part of an item of PPE with a cost that is significant in relation to the total cost of the item shall be depreciated separately. The depreciation charge for each period shall be recognised in profit or loss unless it is included in the carrying amount of another asset.

14. DEPRECIABLE AMOUNT The depreciable amount of an asset shall be allocated on a SYSTEMATIC BASIS over its useful life. USEFUL LIFE is evaluated on the basis of - Expected usage - Physical wear and tear - technical and commercial obsolescence - legal and similar limits The residual value and the useful life of an asset shall be REVIEWED AT LEAST AT EACH FINANCIAL YEAR-END and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

15. DEPRECIATION METHOD The depreciation method used shall reflect the PATTERN in which the asset�s FUTURE ECONOMIC BENEFITS are expected to be consumed by the entity. The depreciation method applied to an asset shall be REVIEWED AT LEAST AT EACH FINANCIAL YEAR-END and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method shall be changed to reflect the changed pattern. Such a change shall be accounted for as a change in an accounting estimate in accordance with IAS 8.

16. IMPAIRMENT An IMPAIRMENT LOSS is the amount by which the carrying amount of an asset exceeds its recoverable amount An entity shall assess at EACH REPORTING DATE whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset.

17. INDICATORS OF IMPAIRMENT EXTERNAL INDICATORS: decline in market value significant changes with an adverse effect in the technological, market, economic or legal environment Increase in market interest rates used to calculate an asset�s value in use the carrying amount of the net assets of the entity is more than its market capitalisation. INTERNAL INDICATORS evidence of obsolescence or physical damage of an asset. significant changes for example, asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, plans to dispose of an asset before the previously expected date, and reassessing the useful life of an asset as finite rather than indefinite. economic performance of an asset is, or will be, worse than expected.

18. ASSET EXCHANGE TRANSACTION In case of asset exchange transactions, the cost of such an item of property, plant and equipment is measured at FAIR VALUE unless the exchange transaction lacks commercial substance, or the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired item is measured in this way even if an entity cannot immediately derecognise the asset given up.

19. DERECOGNITION DISPOSAL OF ASSET AT COST The carrying amount of an item of property, plant and equipment shall be derecognised: on disposal; or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised. Gains shall not be classified as revenue.

20. DISPOSAL AT REVALUED AMOUNT The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised.