Property, Plant, and Equipment Overview

Study Notes

Property, Plant, and Equipment (PPE)

Tangible assets include those held for production, service provision, rental to others, and administrative use.
Recognized in the statement of financial position after deducting accumulated depreciation and impairment losses.

Carrying Amount and Residual Value

Carrying amount reflects the net value of an asset post-depreciation and impairment.
Residual value is the expected amount an entity will receive from an asset at the end of its useful life, minus disposal costs.

Recognition Criteria for PPE

Cost can be recognized as an asset when:
- Future economic benefits are probable.
- The asset's cost can be reliably measured.

Measurement of PPE

Initially measured at cost, including necessary expenditures to prepare the asset for use.
Costs included in initial measurement:
- Original purchase price (inclusive of taxes and customs, minus discounts).
- Dismantling and removal costs.
- Testing costs, with proceeds from any sales credited to profit loss.
- Professional fees.
- Delivery, handling, and installation costs.
- Site preparation costs.

Special Considerations

For deferred payments on intangible assets beyond normal credit terms, the cost is equivalent to the cash price.
Costs not recognized as assets includes:
- Initial operating losses before the asset reaches planned performance.
- General administrative and unrelated operational expenses.

Description

This quiz covers the fundamentals of Property, Plant, and Equipment (PPE), focusing on their characteristics and valuation. Understand the carrying amount, accumulated depreciation, and residual values of tangible assets. Test your knowledge on how these assets are utilized and reported in financial statements.