Malaysian financial credit reporting standard 116

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Malaysian Financial Reporting Standard 116

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Property, Flower and Gear

This kind of version includes amendments resulting from MFRSs with effective date ranges no later than one particular January 2012.

Amendments with an effective time later than 1 January 2012 MFRS 116 have been amended simply by MFRS 13 Fair Worth Measurement*. Since those changes have an effective date following 1 January 2012 they may be not included from this edition. 2.

effective day 1 January 2013


MFRS 116

ITEMS paragraphs Preface INTRODUCTION IN1″IN15

MALAYSIAN MONETARY REPORTING STANDARD 116 PROPERTY, PLANT AND EQUIPMENT TARGET SCOPE EXPLANATIONS RECOGNITION Preliminary costs Future costs WAY OF MEASURING AT REPUTATION Elements of price Measurement of cost MEASUREMENT AFTER RECOGNITION Cost style Revaluation style Depreciation Depreciable amount and depreciation period Depreciation approach Impairment Reimbursement for disability DERECOGNITION DISCLOSURE TRANSITIONAL CONDITIONS EFFECTIVE DATE WITHDRAWAL OF OTHER PRONOUNCEMENTS 1 2″5 6 7″14 11 12″14 15″28 16″22 23″28 29″66 30 31″42 43″62 50″59 60″62 63 65″66 67″72 73″79 70 81″81E 82″83


IFRS Basis

MFRS 116

Malaysian Financial Credit reporting Standard 116 Property, Plant and Tools (MFRS 116) is set out in paragraphs 1″83.

All the paragraphs have equivalent authority. MFRS 116 needs to be read inside the context of its goal and the Basis for A conclusion, the Foreword to Monetary Reporting Standards and the Conceptual Framework pertaining to Financial Credit reporting.

MFRS 108 Accounting Policies, Changes in Accounting Estimations and Mistakes provides a basis for selecting and applying accounting policies inside the absence of specific guidance.



MFRS 116


The Malaysian Accounting Standards Board (MASB) is employing its coverage of concurrence through implementing International Monetary Reporting Standards (IFRSs) since issued by the International Accounting Standards Panel (IASB) to get application intended for annual periods beginning on or after you January 2012. The IASB defines IFRSs as including: (a) Foreign Financial Confirming Standards;

(b) International Accounting Standards; (c) IFRIC Interpretations; and

(d) SIC Understanding. Malaysian Monetary Reporting Requirements (MFRSs) corresponding to IFRSs that apply to any kind of reporting period beginning in or after 1 January 2012 are: (a) Malaysian Monetary Reporting Requirements; and

(b) IC Understanding. First-time putting on MFRSs equal to IFRSs Putting on this Regular will begin inside the first-time adopter’s * initial annual reporting period beginning on or after 1 January 2012 in the contextof implementing MFRSs similar to IFRSs. In cases like this, the requirements of MFRS 1 First-time Re-homing of Malaysian Financial Reporting Standards should be observed. Putting on MFRS you is necessary while otherwise these kinds of financial transactions will not be in a position to assert conformity with IFRS. MFRS one particular, the Malaysian equivalent of IFRS you First-time Re-homing of Intercontinental Financial Credit reporting Standards, needs prior period information, shown as relative information, being restated as though the requirements of MFRSs effective for twelve-monthly period commencing on or right after 1 January 2012 have been applied, except when it (1) prohibits nostalgic application in some aspects or perhaps (2) allows the first-time adopter to work with one or more of the exemptions or perhaps exceptions covered therein.

Therefore, in preparing its first MFRS monetary statements* for a financial period beginning upon or after one particular January 2012, the new adopter shall refer to the provisions a part of MFRS one particular on matters relating to transition and powerful dates rather than the transitional dotacion and effective date included in the respective MFRSs. This differs from previous requirements wherever an business accounted for changes of accounting policies in accordance with the specific transitional provisions contained in the respective Economic Reporting Criteria (FRSs) or in accordance with FRS 108 Accounting Policies, Within Accounting Estimations and Errors when the FRS did not incorporate specific transition provisions.


Appendix A of MFRS 1 describes first-time adopter and 1st MFRS economic statements.


MFRS 116 On this factor the effective and issuance dates a part of this Common are the ones from the IASB’s and are inapplicable in the fresh MFRS framework since MFRS 1 requirements will be applied on 1 January 2012. Comparison and complying with IAS 16 MFRS 116 is the same as IAS of sixteen Property, Grow and Products as granted and changed by the IASB, including the powerful and issuance dates. Organizations that adhere to MFRS 116 willsimultaneously have compliance with IAS of sixteen.


MFRS 116


IN1 Worldwide Accounting Normal 16 House, Plant and Equipment (IAS 16) replaces IAS 18 Property, Flower and Equipment (revised in 1998), and really should be applied for annual periods beginning in or after 1 January 2006. Earlier application is encouraged. The conventional also supercedes the following Interpretations: ï‚· ï‚· ï‚· SIC-6 Costs of Modifying Existing Software SIC-14 Property, Herb and Equipment”Compensation for the Impairment or Loss of Items SIC-23 Real estate, Plant and Equipment”Major Inspection or Change Costs.

IASB’s reasons for revising IAS of sixteen

IN2 The International Accounting Standards Board developed this revised IAS of sixteen as part of it is project on Improvements to International Accounting Standards. The project was undertaken in the light of queries and criticisms elevated in relation to the Standards by investments regulators, specialist accountants and also other interested get-togethers. The targets of the task were to decrease or remove alternatives, redundancies and clashes within the Standards, to deal with a few convergence issues and to make different improvements. Intended for IAS 18 the IASB’s main target was a limited revision to provide additional direction and filtration on selected matters. The IASB did not reconsider the basic approach to the accounting intended for property, herb and products contained in IAS 16.


The main alterations of IAS 16

IN4 The primary changes from the previous edition of IAS 16 happen to be described under.


IN5 This Standard explains that an enterprise is required to apply the principles of the Standard to items of property, plant and equipment accustomed to develop or perhaps maintain (a) biological assets and (b) mineral privileges and vitamin reserves including oil, natural gas and comparable non-regenerative methods.

Recognition: succeeding costsIN6 An entity examines under the standard recognition principle all home, plant and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or build an item of property, flower and equipment and costs incurred subsequently to add to, change part of, or service an item. The previous variation of IAS 16 contained two recognition principles. A great entity used the second recognition principle to subsequent costs.


IFRS Basis

MFRS 116

Measurement at reputation: asset dismantlement, removal and restoration costs IN7 The cost of an item of property, plant and equipment includes the costs of it is dismantlement, removal or restoration, the obligation for which an business incurs as a consequence of installing that. Its cost also contains the costs of its dismantlement, removal or perhaps restoration, the obligation for which an entity incurs as a consequence of making use of the item during a particular period for reasons other than to produce inventories in that period. The previous version of IAS sixteen included within just its range only the costs incurred because of installing the product.

Measurement by recognition: asset exchange deals

IN8 An organization is required to evaluate an item of property, grow and equipment acquired in return for a non-monetary asset or assets, or a combination of financial and nonmonetary assets, in fair worth unless the exchangetransaction is lacking in commercial element. Under the past version of IAS 18, an organization measured this kind of acquired property at good value except if the changed assets were similar.

Measurement after acknowledgement: revaluation version

IN9 If fair value can be measured dependably, an business may hold all components of property, plant and tools of a class at a revalued sum, which is the fair benefit of the items at the time of the revaluation less virtually any subsequent accrued depreciation and accumulated impairment losses. Beneath the previous variation of IAS 16, make use of revalued sums did not depend on whether fair values had been reliably considerable.

Depreciation: product of measure

IN10 An entity is required to identify the downgrading charge separately for each significant part of a specific thing of house, plant and equipment. The prior version of IAS 18 did not because clearly decide this need.

Depreciation: depreciable amountIN11 An entity is required to measure the residual value associated with an item of property, herb and equipment as the amount it estimations it would get currently to get the advantage if the asset were currently of the era and in the problem expected at the conclusion of it is useful life. The previous variation of IAS 16 did not specify perhaps the residual value was to always be this amount or the quantity, inclusive of the consequence of inflation, that the entity expected to receive later on on the asset’s actual retirement living date.

Devaluation: depreciation period

IN12 An enterprise is required to start depreciating a specific thing of house, plant and equipment when it is available for employ and to continue depreciating that until it

IFRS Groundwork


MFRS 116 is derecognised, even if in that period the product is nonproductive. The previous version of IAS 16 did not specify when ever depreciation of your item started out and particular that an organization should end depreciating an item that it experienced retired via active use and was holding pertaining to disposal.

Derecognition: derecognition time

IN13 An enterprise is required to derecognise the holding amount of your item of property, herb and gear that it disposes of on the time the criteria to get the sale of goods in IAS 18 Revenue would be achieved. The previous type of IAS 16 would not require a great entity to use those criteria to determine the time on which this derecognised the carrying sum of a disposed-of item of property, grow and gear. An enterprise is required to derecognise the holding amount of your part of something of real estate, plant and equipment if perhaps that portion has been replaced and the entity has included the cost of the replacement in the carrying amount of the item. The previous type of IAS 16 would not extend the derecognition principle to such parts; alternatively, its reputation principle for subsequent costs effectively precluded the cost of an alternative from getting included in the having amount of the item.


Derecognition: gain classification

IN15 A great entity simply cannot classify as revenue an increase it realises on the fingertips of an item of house, plant and equipment. The prior version of IAS 18 did not include this dotacion.


IFRS Foundation

MFRS 116

Malaysian Financial Reporting Standard 116 Property, Flower and Products


you The objective of this Standard should be to prescribe the accounting treatment for house, plant and equipment so that users in the financial assertions can discern information about an entity’s expenditure in its property, plant and equipment as well as the changes in such investment. The principal issues in accounting pertaining to property, plant and gear are the reputation of the assets, the perseverance of their carrying amounts plus the depreciation charges and disability losses to be recognised with regards to them.


two This Standard shall be utilized in accounting for house, plant and equipment except when an additional Standard requires or enables a different accounting treatment. This Standard does not apply to: (a) property, grow and products classified while held accessible in accordance with MFRS 5 noncurrent Possessions Held on the market and Discontinued Operations;


(b) biological assets relevant to agricultural activity (see MFRS 141 Agriculture); (c) the recognition and way of measuring of exploration and analysis assets (see MFRS 6th Exploration for and Evaluation of Nutrient Resources); or perhaps

(d) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. However , this Regular applies to real estate, plant and equipment accustomed to develop or perhaps maintain the possessions described in (b)”(d). 4 Other Specifications may require recognition of an item of property, plant and equipment based on an approach different from that through this Standard.

For instance , MFRS 117 Leases requires an business to evaluate it is recognition of the item of leased home, plant and equipment on such basis as the transfer of risks and returns. However , in such instances other areas of the accounting treatment for people assets, which includes depreciation, happen to be prescribed at this time Standard. An entity making use of the cost unit for rental properties in accordance with MFRS 140 Investment Property shall utilize cost model in this Regular.



6 The following conditions are used in this Standard with all the meanings particular:

IFRS Foundation


MFRS 116 Carrying amount is a amount when an asset is definitely recognised after deducting any kind of accumulated depreciation and accrued impairment loss. Cost is the amount of cash or cash variation paid or perhaps the fair benefit of the other account given to get an asset during its obtain or structure or, exactly where applicable, the total amount attributed to that asset when ever initially recognised in accordance with the precise requirements of other MFRSs, eg MFRS 2 Share-based Payment. Depreciable amount is the cost of a property, or various other amount substituted for price, less their residual benefit. Depreciation is a systematic allowance of the depreciable amount of the asset more than its valuable life. Entity-specific value is the present worth of the funds flows an entity expects to arise from the continuing use of a property and from the disposal by the end of the useful life or desires to fees when settling a legal responsibility.

Fair benefit is the volume for which a property could be traded between experienced, willing celebrations in an arm’s length deal. An impairment loss is definitely the amount with which the holding amount of an asset is higher than its recoverable amount. Real estate, plant and equipment happen to be tangible items that: (a) happen to be held use with the production or perhaps supply of services or goods, for leasing to others, or for administrative purposes; and (b) are expected to be applied during more than one period. Recoverable amount is definitely the higher of your asset’s good value significantly less costs to trade and its worth in use. The remainder value associated with an asset is definitely the estimated quantity that an entity would presently obtain coming from disposal of the asset, after deducting the estimated costs of fingertips, if the property were previously of the era and in the condition expected towards the end of the useful life. Useful life is: (a) the period over which an asset is likely to be available for proper use by a great entity; or (b) the number of production or perhaps similar products expected to always be obtained from the asset simply by an business.


7 The cost of an item of property, flower and products shall be recognized as a property if, and only if: (a) it is possible that foreseeable future economic rewards associated with the item will stream to the business; and (b) the cost of them can be measured reliably.


IFRS Foundation

MFRS 116 8 Aftermarket and maintenance equipment usually are carried as inventory and recognised in profit or loss because consumed. However , major aftermarket and stand-by equipment qualify as real estate, plant and equipment for the entity desires to use these people during more than one period. Similarly, if the aftermarket and maintenance equipment can be utilised only regarding the an item of property, herb and gear, they are made up as house, plant and equipment.

This kind of Standard does not prescribe the machine of measure for recognition, ie what constitutes a product of house, plant and equipment. As a result, judgement is essential in making use of the recognition standards to an entity’s specific circumstances. It may be suitable to mixture individually unimportant items, just like moulds, equipment and dead, and to apply the criteria towards the aggregate value. An business evaluates beneath this acknowledgement principle all its real estate, plant and equipment costs at the time they are really incurred. These types of costs consist of costs sustained initially to acquire or construct an item of property, plant and tools and costs incurred eventually to add to, substitute part of, or perhaps service this.



Initial costs

10 Items of home, plant and equipment may be acquired for safety or environmental factors. The purchase of such home, plant and equipment, although not directly raising the future economical benefits of any kind of particular existing item of property, grow and tools, may be necessary for an business to obtain the long term economic advantages from its different assets. Such items of house, plant and equipment are entitled to recognition while assets because they permit an business to obtain future monetary benefits from related assets around what could be derived acquired those items not been acquired. For instance , a chemical substance manufacturer may possibly install new chemical handling processes to comply with environmental requirements intended for the production and storage of dangerous chemical compounds; related grow enhancements are recognised because an asset since without them the entity is unable to manufacture promote chemicals. However , the ensuing carrying volume of this asset and related resources is reviewed for disability in accordance with MFRS 136 Impairment of Property.

Subsequent costs

12 Under the recognition principle in paragraph several, an entity does not recognise in the transporting amount associated with an item of property, plant and tools the costs of the day-to-day maintenance of the item. Rather, these types of costs are recognised in profit or loss while incurred. Costs of day-to-day servicing will be primarily the expenses of labour and consumables, and may are the cost of chunks. The purpose of these kinds of expenditures can often be described as to get the ‘repairs and maintenance’ of the item of home, plant and equipment. Regions of some items of property, flower and products may require replacement at frequent intervals. For example , a furnace may require relining


IFRS Basis


MFRS 116 after a specified number of hours of use, or aircraft interiors such as chairs and galleys may require replacement several times during thelife of the airframe. Components of property, flower and gear may also be obtained to make a much less frequently continuing replacement, including replacing the inside walls of any building, or to make a nonrecurring replacement unit. Under the recognition principle in paragraph six, an entity recognises inside the carrying amount of an item of home, plant and equipment the cost of replacing element of such an item when that cost is received if the recognition criteria will be met. The carrying volume of those parts that are substituted is derecognised in accordance with the derecognition conditions of this Standard (see sentences 67″72). 13 A condition of continuing to operate a specific thing of property, plant and equipment (for example, an aircraft) might be performing regular major examinations for flaws regardless of whether areas of the item are replaced.

When ever each key inspection is performed, its cost can be recognised inside the carrying sum of the item of home, plant and equipment as a replacement if the identification criteria are satisfied. Any kind of remaining carrying amount off the cost of the past inspection (as distinct from physical parts) is derecognised. This takes place regardless of whether the cost of the previous inspection was discovered in the transaction in which the item was obtained or constructed. If necessary, the estimated expense of a future identical inspection may be used as indication of what the cost of the present inspection component was when the item was acquired or perhaps constructed.

Measurement at identification

12-15 An item of property, herb and tools that meets your criteria for acknowledgement as an asset shall be tested at its cost.

Elements of expense

16 The cost of an item of home, plant and equipment consists: (a) their purchase price, including import duties and non-refundable purchase income taxes, after deducting trade special discounts and discounts.

(b) any kind of costs immediately attributable to bringing the asset to the location and condition essential for it to be capable of operating in the way intended by management. (c) the initial estimate of the costs of taking out and taking away the item and restoring this website on which it really is located, theobligation for which an entity incurs either when the item is acquired or perhaps as a consequence of having used the item during a particular period for functions other than to generate inventories during that period.


Examples of immediately attributable costs are: (a) costs of employee benefits (as defined in MFRS 119 Worker Benefits) developing directly from the development or acquisition of the item of property, grow and equipment;


IFRS Foundation

MFRS 116 (b) costs of site prep; (c) first delivery and handling costs;

(d) set up and assemblage costs; (e) costs of testing if the asset can be functioning properly, after deducting the net proceeds from selling virtually any items developed while bringing the asset to that particular location and condition (such as examples produced when testing equipment); and specialist fees.

(f) 18

An entity is applicable MFRS 102 Inventories towards the costs of obligations for dismantling, eliminating and restoring the site which an item is situated that are received during a particular period on account of having used the product to produce inventories during that period. The responsibilities for costs accounted for relative to MFRS 102 or MFRS 116 will be recognised and measured relative to MFRS 137 Provisions, Dependant Liabilities and Contingent Resources. Examples of costs that are not costs of an item of home, plant and equipment happen to be: (a) costs of starting a new center;


(b) costs of introducing a fresh product or service (including costs of advertising and promotional activities); (c) costs of performing business in a new site or with a brand new class of customer (including costs of staff training); and

(d) administration and also other general expenses. 20 Reputation of costs in the having amount of your item of property, herb and equipment ceases when the item with the location and condition essential for it to get capable of operating in the way intended simply by management. Therefore , costs received in applying or redeploying an item are generally not included in the carrying amount of the item. For example , the following costs are not within the carrying sum of an item of real estate, plant and equipment: (a) costs sustained while a product capable of operating in the manner intended simply by management has yet being brought into use or is operated at below full ability;

(b) primary operating deficits, such as individuals incurred when demand for the item’s end result builds up; and (c) twenty one costs of relocating or perhaps reorganising component or every one of an entity’s operations.

A lot of operations take place in connection with the construction or advancement an item of property, flower and gear, but are not required to bring the item to the site and state necessary for that to be able of with the manner meant by supervision. These imprevisto operations may occur just before or throughout the construction or perhaps development actions. For example , salary may be earned through using a building internet site as a car park until construction starts. Because incidental operations are not

IFRS Groundwork


MFRS 116 necessary to bring an item for the location and condition necessaryfor it to get capable of operating in the way intended simply by management, the income and related bills of inesperado operations are recognised in profit or loss and included in their very own respective classifications of salary and expense. 22 The price tag on a self-constructed asset is decided using the same principles for an acquired asset. If an entity makes similar possessions for sale in the regular course of organization, the cost of the asset is often the same as the expense of constructing an asset for sale (see MFRS 102). Therefore , virtually any internal revenue are eradicated in coming to such costs. Similarly, the cost of abnormal amounts of wasted material, labour, or other assets incurred in self-constructing an asset is not supplied in the cost of the asset. MFRS 123 Borrowing Costs establishes standards for nice of interest as a component of the carrying sum of a self-constructed item of property, grow and tools.

Measurement of cost

23 The cost of an item of property, grow and machines are the cash selling price equivalent with the recognition date. If payment is deferred beyond normal credit terms, the difference between cash selling price equivalent and the total repayment is accepted as interest over the amount of credit unless of course such fascination is capitalised in accordance with MFRS 123. One or more items of home, plant and equipment may be acquired in return for a non-monetary asset or assets, or maybe a combination of monetary and non-monetary assets. The subsequent discussion relates simply to an exchange of just one non-monetary property for another, but it also applies to all exchanges defined in the preceding sentence.

The price tag on such an item of house, plant and equipment is measured at fair value until (a) the exchange purchase lacks business substance or perhaps (b) the fair value of not the advantage received neither the asset given up is reliably considerable. The obtained item is definitely measured in this manner even if an entity simply cannot immediately derecognise the advantage given up. In case the acquired item is certainly not measured by fair benefit, its cost is definitely measured with the carrying sum of the asset given up. An entity decides whether an exchange transaction has business substance simply by considering the degree to which its future cash moves are expected to change as a result of the transaction. An exchange purchase has industrial substance in the event that: (a) the configuration (risk, timing and amount) with the cash moves of the assetreceived differs from the configuration with the cash flows of the property transferred; or perhaps



(b) the entity-specific value of the part of the entity’s operations troubled by the deal changes as a result of the exchange; and (c) the difference in (a) or perhaps (b) is usually significant in accordance with the good value with the assets changed.

For the purpose of deciding whether a great exchange purchase has business substance, the entity-specific worth of the portion of the entity’s 572

IFRS Basis

MFRS 116 procedures affected by the transaction shall reflect post-tax cash goes. The result of these types of analyses might be clear without an entity having to perform in depth calculations. twenty six The fair value associated with an asset which is why comparable marketplace transactions will not exist can be reliably considerable if (a) the variability in the variety of reasonable fair value estimations is not significant for the asset or (b) the probabilities of the various estimates within the range may be reasonably evaluated and used in estimating reasonable value. If an entity can determine dependably the reasonable value of either the asset received or the advantage given up, then the fair benefit of the advantage given up is utilized to gauge the cost of the asset received unless the fair worth of the advantage received is far more clearly evident. The cost of an item of real estate, plant and equipment organised by a lessee under a financial lease is determined in accordance with MFRS 117. The carrying volume of an item of house, plant and equipment may be reduced by government funds in accordance with MFRS 120 Accounting for Authorities Grants and Disclosure of Government Assistance.

28 28

Dimension after identification

up to 29 An organization shall select either the price model in paragraph 35 or the revaluation model in paragraph 23 as its accounting policy and shall apply that insurance plan to an whole class of property, plant and equipment.

Cost model

30 After reputation as a property, an item of property, herb and equipment shall be taken at its cost less any accrued depreciation and any accrued impairment deficits.

Revaluation unit

31 After identification as a property, an item of property, herb and gear whose reasonable value may be measured dependably shall be transported at a revalued sum, being its fair benefit at the particular date of the revaluation less virtually any subsequent gathered depreciation and subsequent built up impairment loss. Revaluations will probably be made with enough regularity to ensure that the transporting amount does not differ materially from that which would be identified using reasonable value by the end of the confirming period. The fair benefit of property and properties is usually established from market-based evidence simply by appraisal that is normally undertaken simply by professionally skilled valuers. The fair benefit of items of plant and equipment is usually their their market value determined by evaluation. If there is zero market-based proof of fair value because of the specialised nature with the item of property, grow and tools and the item is hardly ever



IFRS Foundation


MFRS 116 offered, except as part of a continuing business, an entity may need to calculate fair value using an income or a lowered replacement cost strategy. 34 The frequency of revaluations is dependent upon the changes in fair principles of the items of property, grow and gear being revalued. When the good value of a revalued property differs materially from its holding amount, a further revaluation is essential. Some components of property, grow and gear experience significant and volatile changes in good value, thus necessitating twelve-monthly revaluation.

This sort of frequent revaluations are pointless for components of property, herb and tools with simply insignificant within fair benefit. Instead, it could be necessary to revalue the item simply every 3 or five years. For the item of property, grow and machines are revalued, any kind of accumulated downgrading at the time of the revaluation is treated in one of the next ways: (a) restated proportionately with the enhancements made on the low carrying volume of the asset so that the transporting amount in the asset following revaluation equals its revalued amount. This approach is often applied when an asset is revalued by means of making use of an index to ascertain its declined replacement cost.


(b) eradicated against the low carrying amount of the asset and the net amount restated to the revalued amount in the asset. This process is often utilized for buildings. The quantity of the realignment arising for the restatement or elimination of accumulated downgrading forms part of the increase or perhaps decrease in carrying amount that may be accounted for in accordance with paragraphs 39 and 45. 36 In the event that an item of property, herb and machines are revalued, the complete class of property, herb and tools to which that asset goes shall be revalued. A class of property, grow and equipment is a collection of property of a identical nature and use in an entity’s operations. The following are examples of separate classes: (a) terrain;


(b) land and buildings; (c) machinery;

(d) ships; (e) (f) airplane; motor vehicles;

(g) furniture and fixtures; and (h) workplace equipment.


IFRS Foundation

MFRS 116 38 The items within a school of home, plant and equipment will be revalued together to avoid selective revaluation of assets plus the reporting of amounts inside the financial assertions that are a combination of costs and values since at different dates. However , a class of assets could possibly be revalued on the rolling basis provided revaluation of the class of assets is completed in a short period and provided the revaluations are kept current. If an asset’s carrying sum is improved as a result of a revaluation, the rise shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation excess. However , the increase shall be recognized in earnings or reduction to the degree that it verso a revaluation decrease of precisely the same asset previously recognised in profit or loss. If an asset’s holding amount is definitely decreased resulting from a revaluation, the decrease shall be recognised in earnings or damage.

However , the decrease shall be recognised consist of comprehensive profits to the extent of virtually any credit balance existing inside the revaluation extra in respect of that asset. The decrease accepted in other extensive income reduces the amount accrued in value under the proceeding of revaluation surplus. The revaluation surplus included in fairness in respect of a specific thing of house, plant and equipment might be transferred right to retained earnings when the asset is derecognised. This may require transferring the whole of the surplus when the asset is definitely retired or perhaps disposed of. Yet , some of the surplus may be transported as the asset is employed by an entity. In such a case, the amount of the transferred could be the difference among depreciation based upon the revalued carrying amount of the property anddepreciation based upon the asset’s original cost. Transfers by revaluation excess to stored earnings aren’t made through profit or loss. The effects of taxes upon income, in the event any, caused by the revaluation of house, plant and equipment will be recognised and disclosed according to MFRS 112 Income Taxes.






43 Each a part of an item of property, plant and gear with a price that is significant in relation to the whole cost of the item shall be depreciated separately. A great entity allocates the amount primarily recognised in respect of an item of property, grow and tools to their significant parts and depreciates separately every single such portion. For example , it may be appropriate to depreciate separately the airframe and machines of an plane, whether owned or controlled by a fund lease. Likewise, if an entity acquires home, plant and equipment controlled by an working lease through which it is the smaller, it may be suitable to depreciate separately amounts reflected in the cost of that item that are attributable to favourable or damaging lease conditions relative to marketplace terms.


IFRS Foundation


MFRS 116 forty-five A significant element of an item of property, flower and equipment may have got a useful existence and a depreciation technique that are the same as the useful life and the depreciation method of an additional significant element of that same item. This sort of parts may be grouped in determining the depreciation demand. To the level that an business depreciates individually some areas of an item of property, herb and gear, it also depreciates separately the rest of the item. The remainder consists of the parts of the item which have been individually certainly not significant. If an entity offers varying anticipations for these parts, approximation approaches may be important to depreciate the remainder in a manner that consistently represents the consumption routine and/or valuable life of its parts. An business may choose to depreciate separately the parts of a specific thing that do not have a cost that is significant pertaining to the total cost of the item. The depreciation impose for each period shall be recognised in earnings or damage unless it is included in the transporting amount of another property.

The depreciation charge to get a period is often recognised in profit or perhaps loss. However , sometimes, the near future economic rewards embodied in an asset happen to be absorbed in producing additional assets. In this case, the depreciation charge constitutes part of the expense of the additional asset and is also included in its carrying amount. For example , the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see MFRS 102). Similarly, downgrading of property, plant and equipment utilized for development actions may be included in the cost of an intangible property recognised in accordance with MFRS 138 Intangible Possessions. Depreciable volume and downgrading period 60 51 The depreciable volume of an asset shall be allotted on a methodical basis more than its beneficial life.

The residual value plus the useful your life of an asset shall be analyzed at least at each financial year-end and, if expectations differ from prior estimates, the change(s) shall be accounted for as being a change in an accounting estimation in accordance with MFRS 108 Accounting Policies, Within Accounting Quotes and Problems. Depreciation can be recognised set up fair worth of the advantage exceeds it is carrying amount, as long as the asset’s left over value does not exceed its carrying quantity. Repair and maintenance associated with an asset tend not to negate the need to depreciate this. The depreciable amount of the asset is decided after deducting its left over value. In practice, the residual worth of an advantage is ofteninsignificant and therefore negligible in the calculations of the depreciable amount. The residual value of your asset may possibly increase to the amount corresponding to or greater than the asset’s carrying sum. If it does, the asset’s depreciation charge is


47 forty eight 49





IFRS Foundation

MFRS 116 no unless and until its residual benefit subsequently reduces to an volume below the asset’s carrying sum. 55 Depreciation of an property begins in the next available for make use of, ie when it is in the position and state necessary for that to be able of operating in the manner intended by administration. Depreciation of the asset ceases at the previous of the time that the asset is grouped as placed for sale (or included in a disposal group that is grouped as organised for sale) in accordance with MFRS 5 and the date which the asset is usually derecognised. Consequently , depreciation does not cease if the asset becomes idle or is retired from lively use unless of course the asset is completely depreciated.

Nevertheless , under consumption methods of devaluation the depreciation charge can be zero during your time on st. kitts is no creation. The future monetary benefits embodied in an asset are used by an entity primarily through the use. Nevertheless , other factors, such as technical or commercial obsolescence and wear and tear while a property remains idle, often result inthe réfaction of the monetary benefits which may have been from the property. Consequently, all the following elements are considered in determining the useful lifestyle of an asset: (a) expected usage of the asset. Usage is evaluated by mention of the the asset’s expected capability or physical outcome.


(b) expected physical wear and tear, which in turn depends on functional factors like the number of adjustments for which the asset is usually to be used and the repair and maintenance programme, and the proper care and maintenance of the advantage while idle. (c) specialized or commercial obsolescence arising from changes or perhaps improvements in production, or perhaps from a change in the market demand for the product or service result of the asset.

(d) legal or related limits around the use of the asset, like the expiry dates of related leases. 57 The valuable life of the asset is usually defined regarding the asset’s expected power to the business. The asset management plan of the enterprise may entail the fingertips of resources after a specific time or right after consumption of the specified amount of the future monetary benefits put in the property. Therefore , the useful lifestyle of an property may be short than their economic lifestyle. The appraisal of the valuable life in the asset is actually a matter of reasoning based on the experience of the organization with related assets.

Area and structures are separable assets and are also accounted for individually, even when they can be acquired with each other. With some conditions, such as quarries and sites used for landfill, land has a unlimited beneficial life and therefore is not really depreciated. Properties have a restricted useful existence and therefore are depreciable assets. A rise in the value of the land on which in turn a building stands would not affect the dedication of the depreciable amount in the building. In the event the cost of land includes the cost of site dismantlement, removing and recovery, that area of the area asset can be depreciated over the period of rewards obtained simply by incurring those costs. Occasionally, the area itself may possibly


fifty nine

IFRS Foundation


MFRS 116 have a limited valuable life, in which case it is depreciated in a manner that reflects the benefits to become derived from this. Depreciation method 60 61 The depreciation method used shall echo the design in which the asset’s future financial benefits are required to be used by the organization. The depreciation method put on an asset will probably be reviewed in least each and every financial year-end and, if perhaps there has been a significant change in the expected design of usage of the future financial benefits embodied in the property, the method shall be changed to reveal the altered pattern. This kind of a change will be accounted for as a change in an accounting estimate in accordance with MFRS 108. Many different depreciation strategies can be used to spend the depreciable amount of your asset over a systematic basis over its useful life.

These methods include the straight-line method, the diminishing balance method as well as the units of production method. Straight-line downgrading results in a continuing charge in the useful your life if the asset’s residual value does not transform. The diminishing balance approach results in a decreasing charge over the useful life. The units of production technique results in a charge depending on the predicted use or perhaps output. The entity selects the method that many closely reflects the anticipated pattern of consumption of the future economic rewards embodied in the asset. That method is applied consistently coming from period to period unless there is a enhancements made on the expected pattern of consumption of those future economic benefits.



63 To determine whether something of home, plant and equipment is impaired, an business applies MFRS 136 Impairment of Possessions. That Regular explains just how an entity reviews the carrying volume of their assets, how it decides the recoverable amount of the asset, so when it acknowledges, or verso the recognition of, an disability loss. [Deleted by IASB]


Payment for disability

sixty five Compensation via third parties intended for items of property, plant and equipment that had been impaired, misplaced or quit shall be a part of profit or perhaps loss when the compensation becomes receivable. Impairments or deficits of items of property, herb and equipment, related statements for or payments of payment from businesses and any subsequent obtain or structure of replacement unit assets are separate economical events and are also accounted for separately as follows: (a) impairments of items of property, plant and equipment are recognised according to MFRS 136;



IFRS Foundation

MFRS 116 (b) derecognition of items of property, plant and gear retired or perhaps disposed of is decided in accordance with this Standard; (c) compensation by third parties to get items of real estate, plant and equipment that had been impaired, dropped or abandoned is included in determining income or damage when it becomes receivable; and

(d) the price of items of home, plant and equipment refurbished, purchased or constructed as replacements is decided in accordance with this kind of Standard.


67 The having amount of the item of property, plant and products shall be derecognised: (a) in disposal; or perhaps (b) the moment no foreseeable future economic benefits are expected from the use or disposal. sixty-eight The gain or loss arising from the derecognition associated with an item of property, plant and products shall be contained in profit or loss if the item is derecognised (unless MFRS 117 requires normally on a sale and leaseback). Gains will not be grouped as revenue. However , a great entity that, in the course of it is ordinary actions, routinely sells items of house, plant and equipment it has held for local rental to others shall transfer this kind of assets to inventories by their carrying amount when they cease to become rented and be held for sale. The proceeds from the sale of such possessions shall be recognized as revenue in accordance with MFRS 118 Revenue. MFRS 5 does not apply when property that are kept for sale in the ordinary course of business are used in inventories.

The disposal of the item of property, plant and products may occur in a variety of ways (eg by sale, by entering into a finance rental or simply by donation). In determining the date of disposal associated with an item, a great entity applies the criteria in MFRS 118 for identifying revenue in the sale of items. MFRS 117 applies to disposal by a sales and leaseback. If, under the recognition principle in section 7, an entity acknowledges in the holding amount of your item of property, grow and products the cost of a better for area of the item, it derecognises the carrying quantity of the replaced part irrespective of whether the substituted part was depreciated individually. If it is certainly not practicable pertaining to an enterprise to determine the having amount with the replaced part, it may utilize cost of the replacement as an indication of what the cost of the replaced part just visited the time it had been acquired or perhaps constructed. The gain or loss as a result of the derecognition of an item of real estate, plant and equipment shall be determined because the difference between net fingertips proceeds, if perhaps any, plus the carrying volume of the item.





IFRS Foundation


MFRS 116 seventy two The consideration receivable about disposal associated with an item of property, plant and equipment is recognised in the beginning at its reasonable value. If perhaps payment for the item is usually deferred, the consideration received is accepted initially in the cash cost equivalent. The difference between the nominal amount from the consideration as well as the cash cost equivalent is recognised as interest revenue in accordance with MFRS 118 showing the effective yield around the receivable.


73 The monetary statements shall disclose, for every single class of property, grow and gear: (a) the measurement basics used for determining the low carrying quantity; (b) the depreciation strategies used; (c) the beneficial lives or perhaps the depreciation costs used;

(d) the major carrying volume and the built up depreciation (aggregated with built up impairment losses) at the beginning and end from the period; and (e) a reconciliation with the carrying sum at the beginning and end with the period showing: (i) (ii) additions; possessions classified as held for sale or incorporated into a disposal group classified as organised for sale in compliance with MFRS 5 and other disposals; acquisitions through business combinations; improves or diminishes resulting from revaluations under paragraphs 31, 39 and 40 and coming from impairment deficits recognised or perhaps reversed consist of comprehensive profits in accordance with MFRS 136; impairment losses accepted in earnings or reduction in accordance with MFRS 136; disability losses turned in profit or damage in accordance with MFRS 136;

(iii) (iv)

(v) (vi)

(vii) depreciation; (viii) the net exchange differences developing on the translation of the monetary statements in the functional forex into a diverse presentation forex, including the translation of a international operation into the presentation money of the confirming entity; and (ix) different changes.


IFRS Foundation

MFRS 116 74 The financial claims shall as well disclose: (a) the lifestyle and amounts of restrictions upon title, and property, herb and gear pledged since security for liabilities; (b) the quantity of expenditures accepted in the carrying amount of the item of property, flower and tools in the course of the construction; (c) the amount of contractual commitments to get the acquisition of property, flower and equipment; and

(d) if it is nondisclosure separately in the statement of comprehensive income, the amount of reimbursement from businesses for items of property, grow and tools that were disadvantaged, lost or perhaps given up that may be included in earnings or damage. 75 Collection of the devaluation method and estimation with the useful your life of possessions are issues of judgement. Therefore , disclosure of the methods adopted plus the estimated beneficial lives or perhaps depreciation prices provides users of financial assertions with information that allows them to review the policies selected by supervision and permits comparisons being made with additional entities. Intended for similar factors, it is necessary to divulge: (a) depreciation, whether recognised in profit or reduction or as an element of the cost of various other assets, within a period; and

(b) accumulated depreciation by the end of the period. 76 In accordance with MFRS 108 an enterprise discloses the nature and effect of a change within an accounting estimation that has an effect in the current period or is expected to have an effect in future periods. Pertaining to property, grow and tools, such disclosure may come up from within estimates regarding: (a) left over values;

(b) the predicted costs of dismantling, taking away or restoring items of property, plant and equipment; (c) useful lives; and

(d) depreciation methods. 77 If perhaps items of house, plant and equipment are stated at revalued amounts, the following should be disclosed: (a) the effective date of the revaluation; (b) whether a completely independent valuer was involved; (c) the methods and significant presumptions applied in estimating the items’ good values;

(d) the degree to which the items’ reasonable values had been determined directly by mention of the observable prices in an lively market or perhaps recent marketplace transactions in arm’s size terms or were approximated using different valuation techniques;

IFRS Foundation


MFRS 116 (e) for each revalued class of property, flower and equipment, the holding amount that would have been accepted had the assets recently been carried underneath the cost style; and the revaluation surplus, indicating the alter for the period and any kind of restrictions for the distribution of the balance to shareholders.

(f) 78

In accordance with MFRS 136 an entity discloses information on impaired property, plant and equipment beyond the information required byparagraph 73(e)(iv)”(vi). Users of economic statements could also find this information tightly related to their needs: (a) the holding amount of temporarily idle property, plant and gear;


(b) the low carrying volume of any kind of fully declined property, flower and equipment that is still in use; (c) the holding amount of property, grow and tools retired by active use and not classified as placed for sale in obedience with MFRS 5; and(d) when the price model can be used, the reasonable value of property, flower and equipment when this really is materially different from the having amount. Consequently , entities must disclose these types of amounts.

Transition provisions

80 The requirements of sentences 24″26 regarding the initial way of measuring of an item of property, plant and equipment bought in an exchange of property transaction shall be applied in future only to long term transactions.

Powerful date

81 A great entity shall apply this Standard to get annual times beginning about or after one particular January 2005. Earlier application is encouraged. In the event that an entity applies this Common for a period beginning before 1 January 2005, this shall reveal that truth. An business shall apply the changes in paragraph 3 to get annual durations beginning in or after 1 January 06\. If an enterprise applies MFRS 6 pertaining to an earlier period, those amendments shall be requested that previous period. MFRS 101 Demonstration of Financial Transactions (IAS you Presentation of Financial Statements as revised by IASB in 2007) corrected the terms used through MFRSs. Additionally it corrected paragraphs 39, 40 and 73(e)(iv). A great entity shall apply these amendments pertaining to annual intervals beginning on or after 1 January 2009. If an business applies MFRS 101 (IAS 1 revised by IASB in 2007) for an early on period, the amendments will probably be applied for that earlier period.




IFRS Groundwork

MFRS 116 81C MFRS three or more Business Mixtures (IFRS a few Business Blends as modified by IASB in 2008) amended paragraph 44. An entity shall apply that amendment for annual periods beginning in or after 1 July 2009. If an entity applies MFRS 3 (IFRS 3 revised by IASB in 2008) for an early on period, the amendment shall also be applied for that previous period. Paragraphs 6 and 69 had been amended and paragraph 68A was added by Improvements to MFRSs (Improvements to IFRSs released by IASB in May 2008). An entity shall apply those changes for total annual periods commencing on or after 1 January 2009. Previously application is usually permitted.

If an entity can be applied the changes for an earlier period it shall divulge that fact and at the same time apply the related amendments to MFRS 107 Statement of Cash Flows. Passage 5 was amended simply by Improvements to MFRSs (Improvements to IFRSs issued by IASB in May 2008). An entity shall apply that amendment in future for total annual periods commencing on or right after 1 January 2009. Previous application is definitely permitted in the event that an entity also applies the amendments to paragraphs eight, 9, twenty two, 48, 53, 53A, 53B, 54, 57 and 85B of MFRS 140 simultaneously. If an entity applies the amendment pertaining to an earlier period it shall disclose that fact.



Disengagement of additional pronouncements

82 83 [Deleted by MASB] [Deleted by MASB]

IFRS Foundation


MFRS 116

Deleted IAS 18 text

Deleted IAS 16 text is produced for information simply and does not kind part of MFRS 116. Paragraph 82 This Standard supersedes IAS sixteen Property, Grow and Products (revised in 1998). Paragraph 83 This kind of Standard supersedes the following Understanding: (a) SIC-6 Costs of Modifying Existing Software;

(b) SIC-14 Home, Plant and Equipment”Compensation pertaining to the Disability or Lack of Items; and (c) SIC-23 Property, Flower and Equipment”Major Inspection or Overhaul Costs.


IFRS Basis


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