Property, plant and equipment schedules template includes in addition to line “Additions” other changes inside the asset groups. After the initial recognition already discussed in our previous post the asset is carried on the balance sheet and various things can happen to it. It may be disposed, classified as held for sale, depreciated, revalued and impaired. When we’ll cover those changes in more detail in our future posts, what are in fact the key principles one should keep in mind when measuring the assets after the initial recognition?
The major change all assets go through is change in value and somehow this needs to be reflected on the balance sheet as well. Depending on the asset type and usage, this change can be negative but also positive. For every separate asset group the management needs to determine which type of subsequent measurement best describes the change in value and the worth of an asset for the company.
So essentially management needs to besides determining the useful live and residual value consider if the assets is in fact carried at simple and easy-to-use cost less accumulated depreciation and impairment or at a more complex revaluation model, where asset is carried at a revalued amount less subsequent depreciation and impairment.
Whichever suits in the eyes of management the best; those principles need to be applied constantly for similar asset groups and need to be revisited annually to see if some other measurement reflects more fairly the actual usage and situation.
So to take good care when preparing the schedule and whilst preparing it, think through if the useful lives and values determined give a true and fair view of the real situation. The Property, plant and equipment schedules template is there to help in disclosing those changes and effects, but it’s you, who has to make the decisions.