Understanding Initial Recognition of Property, Plant, and Equipment under IFRS
Property, plant, and equipment (PPE) play a significant role in the financial reporting of companies, representing tangible assets used in operations. Initial recognition of PPE is a crucial step in accounting for these assets, governed by IAS 16: Property Plant & Equipment. In this blog, we delve into the process of initial recognition of PPE as per the provisions of IAS 16, outlining key principles and considerations in a concise manner. Definition of Property, Plant, and Equipment: Property, plant, and equipment encompass tangible assets held for use in production, supply of goods or services, rental to others, or administrative purposes. These assets are expected to generate economic benefits over multiple periods and are distinct from inventory or financial instruments. Examples include land, buildings, machinery, and vehicles. Criteria for Recognition: According to IAS 16, PPE should be recognized in the financial statements when: It is probable that future econom