Understanding the Initial Recognition and Measurement of

School: The University of Sydney - Course: ACCT 2011 - Subject: Accounting

ACCT2011 WEEK 2 - PROPERTY, PLANTS, AND EQUIPMENT (PPE) LO 1 - Identify the issues involved in the initial recognition and measurement of property, plant and equipment and apply the relevant requirements of AASB 116 'Property, Plant and Equipment' 1.Initial recognition of PPE The cost of an item of PPE shall be recognised as an asset if, and only if: (a)it isprobable thatfuture economic benefits associated with the item will flow to the entity (b)thecost of the item can bemeasured reliably. 2.Measurement at recognition An item of PPE that qualifies for recognition as an asset shall be measured at its cost. The cost of an PPE comprises: i.its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. ii.any costs directly attributable to bringing the asset to the locationand condition necessary for it to be capable of operatingin the manner intended by management. iii.the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

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