Journal of Accounting and Management Information Systems (JAMIS)

Reconsiderations and delimitations on the international treatment for the recognition and measurement of property, plant and equipment

11-12/2005 ,   p97..101

Camelia Iuliana LUNGU

Keywords:   property, plant and equipment; recognition, measurement, cost model, revaluation model

The IASB's main objective for revising IAS 16 is to provide additional guidance and clarification on selected property, plant and equipment (PPE) matters such as recognition of subsequent costs, component approach for depreciation, review of asset's residual value and criteria on derecognizing. The cost of dismantlement, removal and site restoration could be incurred when the asset was initially acquired or in subsequent periods. All exchanges of items of PPE and either intangible asset should be measured at fair value, except when the fair value of neither of the assets exchanged can be determined reliably. The revised IAS 16 includes an additional exception to this rule that is when the exchange transaction lacks commercial substance. The residual value of an asset should be reviewed at least at each financial year-end and, when expectations differ from previous estimates.