AASB 116 Property, Plant and Equipment
The Australian adoption of IAS 16: when the cost of a tangible operating asset is recognised, what makes up its cost, the choice between the cost and revaluation models for each class, component depreciation and the review of useful lives, residual values and methods, derecognition and the gain or loss on disposal, and the disclosures by class, with the not-for-profit modifications for below-market acquisitions and class-based revaluation accounting.
AASB 116 Property, Plant and Equipment is a compliance framework from Australia (Commonwealth) with 6 domains and 17 controls. The largest domains are Measurement after recognition: cost model, revaluation model, depreciation and impairment (paragraphs 29 to 66, Aus39.1, Aus40.1, Aus40.2) – AASB 116 Property, Plant and Equipment (7 controls), Disclosure (paragraphs 73 to 79, Aus77.1, Appendix B) – AASB 116 Property, Plant and Equipment (3 controls), Measurement at recognition: cost and its elements (paragraphs 15 to 28, Aus15.1, Aus15.3) – AASB 116 Property, Plant and Equipment (3 controls). Every control below carries what it requires and what an assessor expects to see.
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Framework Domains (6)
Derecognition (paragraphs 67 to 72) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::67-72 | Derecognition: remove the carrying amount on disposal or when no further benefits are expected, recognise the gain or loss (never as revenue, except for routinely sold rental assets transferred to inventory) when the recipient obtains control under AASB 15, measure consideration at the AASB 15 transaction price, and derecognise replaced parts |
Disclosure (paragraphs 73 to 79, Aus77.1, Appendix B) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::73 | Disclose for each class of PPE the measurement bases, depreciation methods, useful lives or rates, opening and closing gross carrying amounts and accumulated depreciation and impairment, and a reconciliation of the carrying amount showing every category of movement |
| aasb-116-property-plant-and-equipment::74-76 | Disclose restrictions on title and assets pledged as security, expenditure capitalised on assets under construction, contractual commitments to acquire PPE, and (if not shown on the face of the statement of comprehensive income) third-party compensation and the proceeds and cost of items produced before an asset was ready for use; disclose changes in estimates under AASB 108 |
| aasb-116-property-plant-and-equipment::77-79,Aus77.1 | For revalued classes disclose, beyond AASB 13, the effective date, whether an independent valuer was involved, the cost-model carrying amount that would otherwise apply (not required of not-for-profit entities) and the revaluation surplus movement and distribution restrictions; disclose impaired assets under AASB 136; idle, fully depreciated and retired assets and cost-model fair values are encouraged |
Measurement after recognition: cost model, revaluation model, depreciation and impairment (paragraphs 29 to 66, Aus39.1, Aus40.1, Aus40.2) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::29-30 | Accounting policy choice: adopt either the cost model or the revaluation model for each whole class of PPE; owner-occupied property held in unit-linked funds or as insurance underlying items may instead use the AASB 140 fair value model as a separate class |
| aasb-116-property-plant-and-equipment::31-38 | Revaluation model: carry items whose fair value is reliably measurable at fair value at the revaluation date less later depreciation and impairment, revalue often enough that carrying amounts stay close to fair value, revalue whole classes together, and adjust accumulated depreciation consistently |
| aasb-116-property-plant-and-equipment::39-42,Aus39.1-Aus40.2 | Revaluation movements: credit increases to other comprehensive income and the revaluation surplus (through profit or loss only to reverse an earlier loss), charge decreases to profit or loss except against an existing surplus for that asset; not-for-profit entities account on a net class basis; surplus transfers to retained earnings bypass profit or loss |
| aasb-116-property-plant-and-equipment::43-49 | Component depreciation: depreciate separately each part whose cost is significant relative to the whole item, grouping parts with the same life and method, depreciate the remainder, and recognise the charge in profit or loss unless it forms part of another asset's cost |
| aasb-116-property-plant-and-equipment::50-59 | Depreciable amount and period: allocate cost less residual value systematically over useful life, review residual value and useful life at least each year end as a change in estimate, depreciate from availability for use until held-for-sale classification or derecognition, consider usage, wear, obsolescence and legal limits, and treat land and buildings separately |
| aasb-116-property-plant-and-equipment::60-62A | Depreciation method: use a method that mirrors how the asset's benefits are consumed over time, review it at least each year end and change it as a change in estimate when the pattern changes, and never base it on revenue |
| aasb-116-property-plant-and-equipment::63-66 | Impairment and compensation: test PPE for impairment under AASB 136, and recognise third-party compensation for impaired, lost or surrendered items in profit or loss once it is receivable, accounting for the impairment, the derecognition, the compensation and any replacement as separate events |
Measurement at recognition: cost and its elements (paragraphs 15 to 28, Aus15.1, Aus15.3) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::15,Aus15.1,Aus15.3 | Measure a qualifying item at cost on recognition; not-for-profit entities measure an item acquired for consideration significantly below fair value, mainly to further their objectives, at fair value under AASB 13, and that initial measurement is not a revaluation |
| aasb-116-property-plant-and-equipment::16-22A | Elements of cost: include the purchase price net of discounts, directly attributable costs of getting the asset ready for its intended use, and the initial estimate of dismantling and restoration obligations; exclude start-up, training, relocation and administration costs, and stop capitalising once the asset is ready |
| aasb-116-property-plant-and-equipment::23-28 | Measurement of cost: use the cash price equivalent, recognising any excess over normal credit terms as interest; measure assets acquired in non-monetary exchanges at fair value unless the exchange lacks commercial substance or neither fair value is reliably measurable; government grants may reduce the carrying amount |
Objective, scope and definitions (paragraphs 1 to 6, AusCF1, Appendix A) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::2-5 | Scope: apply the Standard to all tangible operating assets unless a different Standard calls for or allows another treatment, with the stated exclusions, and use the cost model for owned investment property carried at cost |
Recognition of PPE costs (paragraphs 7 to 14) – AASB 116 Property, Plant and Equipment
| Code | Title |
|---|---|
| aasb-116-property-plant-and-equipment::11-14 | Initial and subsequent costs: capitalise safety or environmental assets that unlock benefits from other assets, expense day-to-day servicing, capitalise replacement parts and major inspections when the recognition test is met and derecognise what they replace |
| aasb-116-property-plant-and-equipment::7-10 | Recognition principle: capitalise a cost as a PPE asset only when future economic benefits are probable and the cost can be reliably measured, applying that test to every cost when incurred and choosing the unit of account with judgement |
What is AASB 116 Property, Plant and Equipment and who does it apply to?
AASB 116 Property, Plant and Equipment is a compliance framework from Australia (Commonwealth) with 6 domains and 17 controls. The Australian adoption of IAS 16: when the cost of a tangible operating asset is recognised, what makes up its cost, the choice between the cost and revaluation models for each class, component depreciation and the review of useful lives, residual values and methods, derecognition and the gain or loss on disposal, and the disclosures by class, with the not-for-profit modifications for below-market acquisitions and class-based revaluation accounting. It is used by organisations to establish and maintain compliance with industry standards and regulatory requirements.
What does AASB 116 Property, Plant and Equipment actually require?
AASB 116 Property, Plant and Equipment has 17 controls organised across 6 domains. The largest domains are Measurement after recognition: cost model, revaluation model, depreciation and impairment (paragraphs 29 to 66, Aus39.1, Aus40.1, Aus40.2) – AASB 116 Property, Plant and Equipment (7 controls), Disclosure (paragraphs 73 to 79, Aus77.1, Appendix B) – AASB 116 Property, Plant and Equipment (3 controls), Measurement at recognition: cost and its elements (paragraphs 15 to 28, Aus15.1, Aus15.3) – AASB 116 Property, Plant and Equipment (3 controls). Each control defines specific requirements that organisations must implement to achieve compliance.
If I already comply with another framework, how much of AASB 116 Property, Plant and Equipment do I already cover?
AASB 116 Property, Plant and Equipment does not currently have cross-framework mappings in our system. Check back as we continuously expand our mapping database.
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