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If PPE consists of three major parts and each part has its significnat cost of the total cost. Is each part of PPE depreciated separately?

PPE stands for Property, Plant & Equipment

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Question added by Muhammad Faheem , Consultant- Accounts, Audit & Taxation , Basim Associates
Date Posted: 2013/12/07
Zahid Chandio
by Zahid Chandio , Finance Controller , Americana

According to, International accounting standard (IAS-16) If an entity is following cost model of asset recognition than for assets which have significant cost parts in relation to its total cost, than such items must be depreciated seperately.

 

Asad zaman
by Asad zaman , Audit/Finance , Rafaqat Baber and co

yes, and the big example is that of aeroplane

Deleted user
by Deleted user

I support answer submitted by Mr. Zahid Chandio.

SHAIKH MOHAMMED BASHEER AHMED SHAIKH
by SHAIKH MOHAMMED BASHEER AHMED SHAIKH , Account Manager , Tarik Al Zahid Holding Company

Yes, IAS16 does not prescribe the unit of measure for recognition – what constitutes an item of property, plant, and equipment. [IAS16.9]  that if the cost model is used, each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately. [IAS16.43]

Rahma  Akmad
by Rahma Akmad , Accountant-General Ledger , Sidra Medicine

If that part is relevant to that particular PPE, and then the PPE cannot be in used without those parts, then it must be added as part of cost of PPE, and iwill be depreciated accordingly (retro or prospective).

Abubakar Abubakar
by Abubakar Abubakar , MANAGING PARTNER , ZIB CONSULTANTS (ZIBCO)

The answer from brother zahid is correct as per IAS16.

Menerva Melad
by Menerva Melad , Account Executive, Key Accounts , Graphic Home Company

If an entity is following cost model of asset recognition than for assets which have significant cost parts in relation to its total cost

Shamim Khan Dawar
by Shamim Khan Dawar , Group Finance Manager , JAWAHR | Jawa Logistics | Orient Trading(OMATRA)

Yes.