The objective of IAS 16 is to prescribe the accounting treatment for property, plant and equipment. The principal issues are the timing of recognition of assets, the determination of their carrying amounts and the depreciation charges to be recognised in relation to them.
Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
(b) are expected to be used during more than one period.
Cost is the amount of cash or cash equivalent paid and the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction.
Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses
Depreciation is the systematic allocation of the depreciable amount of an asset over is useful life.
Useful life is either:
(a) the period of time over which an asset is expected to be used by the enterprise; or
(b) the number of production or similar units expected to be obtained from the asset by the enterprise.
Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value
Residual value is the net amount which the enterprise expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal.
