Ias16

Introduction

Reasons for revising IAS16

The objectives of the project were to reduce or eliminate alternatives, redundancies and conflicts within the Standards, to deal with some convergence issues and to make other improvements.

Major changes in IAS16

This Standard clarifies that an entity is required to apply the principles of this Standard to items of property, plant and equipment used to develop or maintain a)biological assets and b) mineral rights and mineral reserves. This revision also applies the recognition of costs incurred subsequently to add to, replace part of, or service an item; however, the previous version of IAS 16 included within its scope only the costs incurred as a consequence of installing the item. The recognition of asset exchange transaction is required to record at fair value at fair value unless the exchange transaction lacks commercial substance. Under the previous version of IAS 16, use of revalued amounts did not depend on whether fair values were reliably measurable. For this version, if fair value can be measured reliably, an entity may carry all items of property, plant and equipment of a class at a revalued amount.

This version also requires the depreciation to be charged separately for each significant part of an item of property, plant and equipment. The measurement of the residual value of an item of property, plant and equipment as the amount it estimates it would receive currently for the asset is also obligatory. The deprciation period should start from when it is available for use and to continue depreciating it until it is derecognised, even if during that period the item is idle. An entity is required to derecognise the carrying amount that it disposes of on the date the criteria for the sale of goods.

This version also stated that an entity cannot record a gain, it realises on the disposal of an item of property, plant and equipment, as revenue.

International Accounting Standard 16 Property, Plant and...