TaxTMI 
TaxTMI 
Property, Plant and Equipment
X X X X Extracts X X X X
X X X X Extracts X X X X
....sale in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. (b) biological assets related to agricultural activity other than bearer plants (See Ind AS 41, Agriculture). This Standard applies to bearer plants but it does not apply to the produce on bearer plants. (c) the recognition and measurement of exploration and evaluation assets (see Ind AS 106, Exploration for and Evaluation of Mineral Resources). (d) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. However, this Standard applies to property, plant and equipment used to develop or maintain the assets described in (b)-(d). 15[****] 16[5. An entity accounting for investment property in accordance with Ind AS 40, Investment Property, shall use the cost model in this Standard for owned investment property.] Definitions 6 The following terms are used in this Standard with the meanings specified: A bearer plant is a living plant that: (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cost of the item can be measured reliably. 8 . Items such as spare parts, stand-by equipment and servicing equipment are recognised in accordance with this Ind AS when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory. 9 This Standard does not prescribe the unit of measure for recognition, ie what constitutes an item of property, plant and equipment. Thus, judgement is required in applying the recognition criteria to an entity's specific circumstances. It may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies, and to apply the criteria to the aggregate value. 17[10. An entity evaluates under this recognition principle all its property, plant and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. The cost of an item of property, plant and equipment may include costs incurred relating to leases of assets that are used to construct, add to, replace part of or service an item of property, plant and equipm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cognition criteria are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of this Standard (see paragraphs 67-72). 14 A condition of continuing to operate an item of property, plant and equipment (for example, an aircraft) may be performing regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. This occurs regardless of whether the cost of the previous inspection was identified in the transaction in which the item was acquired or constructed. If necessary, the estimated cost of a future similar inspection may be used as an indication of what the cost of the existing inspection component was when the item was acquired or constructed. Measurement at recognition 15 An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er (including costs of staff training); and (d) administration and other general overhead costs. 20 Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an item are not included in the carrying amount of that item. For example, the following costs are not included in the carrying amount of an item of property, plant and equipment: (a) costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at less than full capacity; (b) initial operating losses, such as those incurred while demand for the item's output builds up; and (c) costs of relocating or reorganising part or all of an entity's operations. 21 Some operations occur in connection with the construction or development of an item of property, plant and equipment, but are not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management. These incidental....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all exchanges described in the preceding sentence. The cost of such an item of property, plant and equipment is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired item is measured in this way even if an entity cannot immediately derecognise the asset given up. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up. 25 An entity determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction. An exchange transaction has commercial substance if: (a) the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or (b) the entity-specific value of the portion of the entity's operations affected by the transaction changes as a result of the exchange; and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent experience significant and volatile changes in fair value, thus necessitating annual revaluation. Such frequent revaluations are unnecessary for items of property, plant and equipment with only insignificant changes in fair value. Instead, it may be necessary to revalue the item only every three or five years. 35 When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways: (a) the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or (b) the accumulated depreciation is eliminated against the gross carrying amount of the asset. The amount of the adjustment of accumula....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arrying amount of the asset and depreciation based on the asset's original cost. Transfers from revaluation surplus to retained earnings are not made through profit or loss. 42 The effects of taxes on income, if any, resulting from the revaluation of property, plant and equipment are recognised and disclosed in accordance with Ind AS 12, Income Taxes. Depreciation 43 Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. 19[44. An entity allocates the amount initially recognised in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. For example, it may be appropriate to depreciate separately the airframe and engines of an aircraft. Similarly, if an entity acquires property, plant and equipment subject to an operating lease in which it is the lessor, it may be appropriate to depreciate separately amounts reflected in the cost of that item that are attributable to favourable or unfavourable lease terms relative to market terms.] 45 A significant part of an item of property, plant and equipment may have a u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mount of an asset is determined after deducting its residual value. In practice, the residual value of an asset is often insignificant and therefore immaterial in the calculation of the depreciable amount. 54 The residual value of an asset may increase to an amount equal to or greater than the asset's carrying amount. If it does, the asset's depreciation charge is zero unless and until its residual value subsequently decreases to an amount below the asset's carrying amount. 55 Depreciation of an asset begins when it is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. However, under usage methods of depreciation the depreciation charge can be zero while there is no production. 56 The future economic benefit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et is depreciated over the period of benefits obtained by incurring those costs. In some cases, the land itself may have a limited useful life, in which case it is depreciated in a manner that reflects the benefits to be derived from it. Depreciation method 60 The depreciation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity. 61 The depreciation method applied to an asset shall be reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method shall be changed to reflect the changed pattern. Such a change shall be accounted for as a change in an accounting estimate in accordance with Ind AS 8. 62 A variety of depreciation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the asset's residual value does not change. The di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chased or constructed as replacements is determined in accordance with this Standard. Derecognition 67 The carrying amount of an item of property, plant and equipment shall be derecognised: (a) on disposal; or (b) when no future economic benefits are expected from its use or disposal. 20[68 The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised (unless Ind AS 116, Leases, requires otherwise on a sale and leaseback). Gains shall not be classified as revenue.] 6[68A However, an entity that, in the course of its ordinary activities, routinely sells items of property, plant and equipment that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.] 20[69. The disposal of an item of property, plant and equipme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ases or decreases resulting from revaluations under paragraphs 31, 39 and 40 and from impairment losses recognised or reversed in other comprehensive income in accordance with Ind AS 36; (v) impairment losses recognised in profit or loss in accordance with Ind AS 36; (vi) impairment losses reversed in profit or loss in accordance with Ind AS 36; (vii) depreciation; (viii) the net exchange differences arising on the translation of the financial statements from the functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity; and (ix) other changes. 74 The financial statements shall also disclose: (a) the existence and amounts of restrictions on title, and property, plant and equipment pledged as security for liabilities; (b) the amount of expenditures recognised in the carrying amount of an item of property, plant and equipment in the course of its construction; (c) the amount of contractual commitments for the acquisition of property, plant and equipment; and (d) if it is not disclosed separately in the statement of profit and loss, the amount of compe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red from active use and not classified as held for sale in accordance with Ind AS 105; and (d) when the cost model is used, the fair value of property, plant and equipment when this is materially different from the carrying amount. Therefore, entities are encouraged to disclose these amounts. 9[Transitional Provisions 80 * 80A * 80B * 80C * Effective Date 81 * 81A * 81B * 81C * 81D * 81E * 81F * 81G * 81H * 81I * 81J As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers, paragraphs 68A, 69, 72 are amended. An entity shall apply those amendments when it applies Ind AS 115.] 21[81K Omitted* (*Refer Appendix 1) 81L Ind AS 116 deleted paragraphs 4 and 27 and paragraph 3 of Appendix C and amended paragraphs 5, 10, 44, 68-69 and paragraph 2 of Appendix A. An entity shall apply those amendments when it applies Ind AS 116.] Appendix A Changes in Existing Decommissioning, Restoration and Similar Liabilities This Appendix is an integral part of the Ind AS. Background 1 Many entities have obligations to dismantle, remove and restore items of property, plant and equipment. In this Appendix such obligations are referred to as 'decomm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liability shall be added to, or deducted from, the cost of the related asset in the current period. (b) the amount deducted from the cost of the asset shall not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in profit or loss. (c) if the adjustment results in an addition to the cost of an asset, the entity shall consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the entity shall test the asset for impairment by estimating its recoverable amount, and shall account for any impairment loss, in accordance with Ind AS 36. 6 If the related asset is measured using the revaluation model: (a) changes in the liability alter the revaluation surplus or deficit previously recognised on that asset, so that: (i) a decrease in the liability shall (subject to (b)) be recognised in other comprehensive income and increase the revaluation surplus within equity, except that it shall be recognised in profit or loss to the extent that it reverses a revaluation deficit on the asset that was previously recognised i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly by using the units of production method, once production begins. 3. A mining entity may continue to remove overburden and to incur stripping costs during the production phase of the mine. 4. The material removed when stripping in the production phase will not necessarily be a total waste; often it will be a combination of ore and waste. The ratio of ore to waste can range from uneconomic low grade to profitable high grade. Removal of material with a low ratio of ore to waste may produce some usable material, which can be used to produce inventory. This removal might also provide access to deeper levels of material that have a higher ratio of ore to waste. There can therefore be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. 5. This Appendix considers when and how to account separately for these two benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently. Scope 6. This Appendix applies to waste removal costs that are incurred in surface mining activity dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erform the stripping activity. Some incidental operations may take place at the same time as the production stripping activity, but which are not necessary for the production stripping activity to continue as planned. The costs associated with these incidental operations shall not be included in the cost of the stripping activity asset. An example of such type of incidental operations would be building an access road in the area in which the stripping campaign is taking place. 13. When the costs of the stripping activity asset and the inventory produced are not separately identifiable, the entity shall allocate the production stripping costs between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure. This production measure shall be calculated for the identified component of the ore body, and shall be used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. Examples of such measures include: (a) cost of inventory produced compared with expected cost; (b) volume of waste extracted compared with expected volume, for a given volume of o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... References to matters contained in other Indian Accounting Standards This Appendix is an integral part of the Ind AS. This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 16, Property, Plant and Equipment. 11[1. Appendix D, Service Concession Arrangements contained in Ind AS 115, Revenue from Contracts with Customers.] 12[2. Appendix E, Service Concession Arrangements: Disclosures contained in Ind AS 115, Revenue from Contracts with Customers.] 23[****] 4 Appendix A, Intangible Assets-Web Site Costs contained in Ind AS 38, Intangible Assets. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 16 and the corresponding International Accounting Standard (IAS) 16, Property, Plant and Equipment, and IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities and IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine issued by the International Accounting Standards Board. Comparison with IAS 16, Property, Plant and Equipment, I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment.] ******************** Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "68A However, an entity that, in the course of its ordinary activities, routinely sells items of property, plant and equipment that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories." 2. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "69 The disposal of an item of property, plant and equipment may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). The date of disposa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "3[72 The consideration receivable on disposal of an item of property, plant and equipment is recognised initially at its fair value. If payment for the item is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 reflecting the effective yield on the receivable.]" 9. Inserted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018 10. Inserted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018 11. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "4[1 Appendix A, Service Concession Arrangements contained in Ind AS 11, Construction Contracts.]" 12. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "5[2 Appendix B, Service Concession Arrangements: Disclosures ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accordance with Ind AS 17." 19. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "44 An entity allocates the amount initially recognised in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. For example, it may be appropriate to depreciate separately the airframe and engines of an aircraft, whether owned or subject to a finance lease. Similarly, if an entity acquires property, plant and equipment subject to an operating lease in which it is the lessor, it may be appropriate to depreciate separately amounts reflected in the cost of that item that are attributable to favourable or unfavourable lease terms relative to market terms." 20. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "68 The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised (unless Ind AS 17 requires otherwise on a sale and leaseback). Gains shall not be classified....