PPE defined

Property, plant and equipment are “tangible assets which are held by an entity for use in production or supply of goods and services, for rental to others, or for administrative purposes, and are expected to be used during more than one period.

Major characteristics of PPE a. They are intangible assets, meaning with “physical substance”. b. Are use in business, meaning used in production or supply of goods and services, for rental purposes and for administrative purposes.

Note: assets that are held for sale, including land, or held for investment are not included in PPE.

c. Are expected to be used over a period of more than one year.

ACCOUNTING FOR PROPERTY, PLANT & EQUIPMENT

Initial Measurement of PPE – at Costs

Elements of cost 1. Purchase price, including import duties and nonrefundable purchase taxes, after deducting trade discounts and rebates. 2. Cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management Examples: a. Costs of employee benefits arising directly from the construction or acquisition of the item of PPE. b. Cost of site preparation c. Initial delivery and handling cost d. Installation and assembly cost e. Professional fees f. Costs of testing whether the asset is functioning properly after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition, such as samples produced when testing equipment 3. Initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other