Property, Plant and Equipment, Understand AS 10 for CA Inter

Understanding Property, Plant and Equipment (PPE) is a cornerstone for financial reporting and accounting, especially for CA students aspiring to excel in their CA exams . AS 10 lays down comprehensive guidelines to ensure users of financial statements gain insights into the investments made in PPE and the associated changes over time. It also subsumes the provisions of the now-withdrawn AS 6, which previously governed depreciation.

What Are Property, Plant, and Equipment?

• They are tangible assets.
• They are held for use in operations and not for sale.
• They provide future economic benefits.

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Applicability of AS 10 Property, Plant and Equipment

Recognition and Measurement of Property, Plant, and Equipment

Recognition:

1. Future economic benefits are probable.
2. The cost can be reliably measured.

Measurement:

1. Cost Model: Carrying amount = Cost - Accumulated Depreciation - Impairment Losses.
2. Revaluation Model: Carrying amount = Revalued Fair Value - Accumulated Depreciation - Impairment Losses.

Note : Revaluations must occur regularly to ensure the carrying amount aligns with fair value.

Depreciation of Property, Plant and Equipment

Differences Between AS 10 and Ind AS 16

Also Check: Price Determination in Different Markets

Depreciation Methods and Their Impact on Financial Statements

• Straight-Line Method (SLM): Spreads costs evenly over the asset's useful life.
• Diminishing Balance Method: Higher depreciation in early years.
• Units of Production Method: Based on usage or output.

Major Updates From AS 6 to AS 10