P1 PROPERTY, PLANT AND EQUIPMENT

Initial Measurement
- at cost, cash + FV of consideration GIVEN
Cost
Purchase Price
+Import duties
+NONrefundable purchase taxes
-Trade Discounts and Rebates

Cost Model
Cost less accumulated depreciation and
accumulated impairment
Revaluation Model
Revalued amount less subsequent depreciation
and subsequent
impairment

*cost of bringing the asset to location and

Rules on valuing PPE upon acquisition

condition of operating

Cash basis

*initial estimate of DISMANTLING, REMOVING and

RESTORING the site
*obligation incurred as a consequence OTHER than
to produce inventories
Directly Attributable Costs (SPICED)
Site preparation
Professional Fees
Installation and Assembly Costs
Cost of testing, NET of proceeds
Employee Benefits
Site Preparation
*cost of training staff to operate machinery is
EXCLUDED
Costs NOT capitalizable
Opening new facility
Introducing new product (advertising and
promotion)
Conducting to new customers or to new location
Administration and Overhead Costs
Costs incurred when asset is CAPABLE of operating
Initial operating losses
Relocation and Reorganizing part or all of an
entitys OPERATION * this refers to the moving to

-cost plus attributable costs

-lump sum, apply relative FMV method

On account (lump sum)

-ALWAYS recorded at NET OF DISCOUNT whether
taken or NOT
-If not taken, charge to purchase discount lost

Installment Basis
-record at CASH price + PV of payment
difference between cash price and total
payments is AMORTIZED
-no cash price is available, PV of payment @
implied interest rate

Issuance of Share Capital in exchange of Asset

(Company paid shares)
1. FV of property received
2. FV of shares issued
3. Par value of shares issued

Issuance of Bonds Payable in exchange of Asset

(Company paid bonds)
1. FV of bonds
2. FV of property
3. Face Value of Bonds

other business locations not the location of the

Exchange no cash involved

machine itself

1. FV of asset given

Subsequent Measurement

P1 PROPERTY, PLANT AND EQUIPMENT

2. FV of asset acquired

income

3. CA of asset given

*Gain/Loss = NET disposal proceeds less CA

Exchange + Cash
Payor FV of asset given + cash

*fully depreciated property, NOT removed from

Recipient FV of asset given cash

accounts, however, it is ENCOURAGED to be

Gain or Loss on Exchange = FV of asset given - CA

disclosed

Exchange lacks commercial substance

*Property recognized as Held for Sale, NOT PPE,

Payor CA of asset given + cash

but as current asset; not depreciated

Recipient CA of asset given cash

NO GAIN OR LOSS

Trade in
-Fair Value of asset given + cash payment
-if FV not clearly determinable, Trade in + Cash
payment
Fair Value of Asset Given = Total Cash Price Trade
in Value

Donation (Shareholders/Government Grant)

-recorded at FV; recorded as income
-expenses incurred in relation to DONATION,

*Idle/abandoned property
-temporarily idle, still depreciated
Optional Disclosures
1. Carrying amount of temporary idle PPE
2. Gross CA of fully depreciated PPE
3. CA of retired from active use and held for sale
4. FV of PPE when COST MODEL is used
In computing costs, deduct Trade Discounts and
Rebates FIRST, then deduct the purchase discount.
Any proceed from sale of salvaged material is

charged to DONATED CAPITAL

deducted from cost of the asset recorded.

-directly attributable costs, CAPITALIZED

Fair Value of Asset Given = Total Cash Price Trade

Construction

in Value

-DM, DL, OH (based on DL cost/hours)

If there is NO COMMERCIAL SUBSTANCE, no gain

*self-construction cost < purchase, recorded as

or loss

savings NOT income

*self-construction cost > purchase, not loss
*if excess is materially excessive, charged to
management
*abnormal waste expensed, normal waste
capitalized
*intervening operations/incidental operations,
separately recognized
Derecognition
When? 1. No future economic benefits 2. Disposal
*Gains from disposal ARE NOT REVENUE, they are

Gain or Loss on Exchange = FV of asset given CA

Borrowing Costs incurred to finance the equipment
is CAPITALIZABE, that is, interest expense