Category Archives: 1.05 Property, Plant and Equipment

Property, plant and equipment that’s not in use

First and foremost it’s important you go about and actually investigate into your property, plant and equipment items to identify all assets which don’t find any usage within your business, your production. Often enough I see that it’s not done and assets are carried on the balance sheet even if they’re fully depreciated and in reality not existing. There’s just clutter on your balance sheet that you should get rid of.  Continue reading

Presenting property, plant and equipment as well as intangible assets on the statement of cash flows

Property, plant and equipment and intangible assets for the purpose of presentation on the statement of cash flows are reported partly under all of the three grouping of cash flows a company can have. Since there are many aspects of acquiring and measuring for tangible and intangible assets, it only makes sense they are also disclosed differently.   Continue reading

Depreciation treatment for prepayments and construction in progress

When we think “depreciation”, we define it as reflecting on consuming future economic benefits arising from the asset. However, depreciation of an asset nonetheless begins when it’s available for use, that is, it is in the condition and location which are necessary for the asset to operate as intended. If you think about it, we cannot talk about economic benefits if the asset is still in store, can we?  Continue reading

Depreciation

In essence, what does this “depreciation of property, plant and equipment” mean? IAS 16 defines depreciation as “systematic allocation of the depreciable amount of an asset over its useful life”. For easier understanding I think it’s important to tear the definition into pieces – systematic allocation, depreciable amount and useful life.  Continue reading