This standard provides guidance on accounting for property, plant and equipment (PPE), which typically constitute a significant portion of total assets. It discusses capitalization of expenditures on PPE, depreciation, retirement and disposal of PPE. These have a material impact on balance sheet and profit and loss statement. The standard scopes in tangible items held for use in production/supply of goods/services, rental to others or for administrative purposes, which are expected to be used for more than one period.

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About the Authors
I-5

5. As most of you might have been aware, our previous works on Ind AS
and Auditing gained momentum in the student community of ICAI at
intermediate and final levels. Ever since then, working on a practical
book for members has been our brainchild though the time permitted
us only now. Moreover, most of our students who entered the
practicing
/
employment field post qualification shared their feedback
with us expressing their need for a simple and practical work on Ind
AS to guide them in their day-to-day routine. This pushed us to work
tirelessly for past few months to bring out this our maiden work for
the member community. As we have been catering to the student
community for more than a decade, we understand how difficult it is
for members to cope up with various developments in the accounting
standards’ area to keep up-to-date. Moreover, ever since Indian
standards started aligning themselves with the global counterpart, it
added further to the complexity.
To assist members in practice
/
employment with a one stop reference
and including practical and lucid explanations/illustrations
on complex matters, care has been taken to make your reading
experience enjoyable. Every attempt has been made to explain the
concepts in simplistic manner and yet without diluting the content of
the standard.
Salient features of the book
u
Covers all the amendments till June 2021;
u
Number of illustrations & process flow charts to understand the
provision of Ind AS;
Preface
I-7

6. I-8
P
R
E
F
A
C
E
u
Covers entire standard, application guidance, FAQs of
educational material issued by ICAI and Illustrative examples
issued by IASB;
u
Covers the differences between Ind AS & AS as well as Ind AS &
IFRS at the end of every standard.
From the bottom of our heart, we are grateful to our dearest friends
CA. Praveen Kumar Gunda & CA. Rama Krishna Reddy Borra for
their continuous help in motivating and correcting us at every stage
of the book.
While considerable care has been taken to ensure that the contents
of the book are accurate, a few inadvertent errors and omissions
might have crept in, for which we would request our readers with all
humility to bear with us and we request you to kindly notify the same
to us at the below email for prompt action.
CA RAVI KANTH MIRIYALA
CA SUNITANJANI MIRIYALA

7. Contents
PAGE
About the Authors I-5
Preface I-7
Introduction I-13
The Conceptual Framework for Financial Reporting I-27
Schedule III - Division II I-39
Ind AS 1
u PRESENTATION OF FINANCIAL STATEMENTS 1
Ind AS 2
u INVENTORIES 39
Ind AS 7
u STATEMENT OF CASH FLOW 61
Ind AS 8
u ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND
ERRORS 81
Ind AS 10
u EVENTS AFTER THE REPORTING PERIOD 112
Ind AS 12
u INCOME TAXES 124
Ind AS 16
u PROPERTY, PLANT AND EQUIPMENT (PPE) 172
I-9

8. I-10
C
O
N
T
E
N
T
S
Ind AS 19
u EMPLOYEE BENEFITS 219
Ind AS 20
u ACCOUNTING FOR GOVERNMENT GRANTS 265
Ind AS 21
u THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES 289
Ind AS 23
u BORROWING COSTS 332
Ind AS 24
u RELATED PARTY DISCLOSURES 357
Ind AS 27
u SEPARATE FINANCIAL STATEMENTS 385
Ind AS 28
u INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 396
Ind AS 33
u EARNINGS PER SHARE (EPS) 425
Ind AS 34
u INTERIM FINANCIAL REPORTING (IFR) 460
Ind AS 36
u IMPAIRMENT OF ASSETS 487
Ind AS 37
u PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS 536
Ind AS 38
u INTANGIBLE ASSETS 572
Ind AS 40
u INVESTMENT PROPERTY 609
Ind AS 41
u AGRICULTURE 625
Ind AS 101
u FIRST-TIME ADOPTION OF INDIAN ACCOUNTING STANDARDS 636
PAGE

9. C
O
N
T
E
N
T
S
I-11
Ind AS 102
u SHARE BASED PAYMENTS 649
Ind AS 103
u BUSINESS COMBINATION 696
Ind AS 104
u INSURANCE CONTRACTS 780
Ind AS 105
u NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED
OPERATIONS 795
Ind AS 106
u EXPLORATION FOR AND EVALUATION OF MINERAL RESOURCES 818
Ind AS 108
u OPERATING SEGMENTS 825
Ind AS 109, 32 107
u FINANCIAL INSTRUMENTS 845
Ind AS 110
u CONSOLIDATED FINANCIAL STATEMENTS 973
Ind AS 111
u JOINT ARRANGEMENTS 1048
Ind AS 112
u DISCLOSURE OF INTERESTS IN OTHER ENTITIES 1062
Ind AS 113
u FAIR VALUE MEASUREMENT 1071
Ind AS 114
u REGULATORY DEFERRAL ACCOUNTS 1102
Ind AS 115
u REVENUE FROM CONTRACTS WITH CUSTOMERS 1115
Ind AS 116
u LEASES 1202
PAGE

10. Objective
u
G
e
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r
a
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l
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a
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(
P
P
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a
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i
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f
fi
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a
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u
T
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o
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.
Scope
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a
r
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g
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n
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r
a
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l
y
g
r
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p
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o
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s
/
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a
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s
,
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d
,
b
u
i
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,
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a
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a
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,
f
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r
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a
n
d
f
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x
t
u
r
e
s
,
c
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m
p
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r
s
,
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t
c
.
T
h
i
s
s
t
a
n
d
a
r
d
d
o
e
s
N
O
T
d
e
a
l
w
i
t
h
t
h
e
f
o
l
l
o
w
i
n
g
:
(
a
)
P
P
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c
l
a
s
s
i
fi
e
d
a
s
h
e
l
d
f
o
r
s
a
l
e
(
dealt by Ind AS 105
)
;
(
b
)
B
i
o
l
o
g
i
c
a
l
a
s
s
e
t
s
(
a
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a
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f
a
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a
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a
g
r
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c
u
l
t
u
r
a
l
a
c
t
i
v
i
t
y
other than bearer
plants
(
See below for bearer plant definition
)
.
T
h
i
s
S
t
a
n
d
a
r
d
applies to bearer plant
b
u
t
i
t
d
o
e
s
not apply to the Agriculture
produce
o
n
b
e
a
r
e
r
p
l
a
n
t
s
(
dealt by Ind AS 41 Agriculture
)
;
(
c
)
R
e
c
o
g
n
i
t
i
o
n
a
n
d
M
e
a
s
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r
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m
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p
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a
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d
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v
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u
a
t
i
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n
a
s
s
e
t
s
(
R
e
f
e
r
I
n
d
A
S
1
0
6
)
;
PROPERTY, PLANT AND
EQUIPMENT (PPE)
16
IND AS
172

11. I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
173
(
d
)
M
i
n
e
r
a
l
r
i
g
h
t
s
a
n
d
m
i
n
e
r
a
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r
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s
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r
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u
c
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a
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t
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a
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a
n
d
s
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m
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l
a
r
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o
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-
r
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g
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n
e
r
a
t
i
v
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r
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s
o
u
r
c
e
s
;
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n
d
(
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)
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f
a
P
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s
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n
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m
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m
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r
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d
b
y
a
n
y
o
t
h
e
r
I
n
d
A
S
(
like Ind AS 116 - finance lease
)
t
o
t
h
a
t
e
x
t
e
n
t
o
n
e
s
h
o
u
l
d
f
o
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l
o
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t
h
e
r
e
s
p
e
c
t
i
v
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s
t
a
n
d
a
r
d
.
Note:
A
n
i
n
d
i
v
i
d
u
a
l
P
P
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a
c
q
u
i
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p
or
m
a
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a
c
t
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s
c
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r
e
d
i
n
(
b
)
t
o
(
d
)
a
b
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,
a
n
d
t
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e
a
r
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s
e
p
a
r
a
b
l
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f
r
o
m
t
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a
c
t
i
v
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t
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s
,
a
r
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t
o
b
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a
c
c
o
u
n
t
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d
f
o
r
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r
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i
s
S
t
a
n
d
a
r
d
.
I
n
v
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s
t
m
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n
t
p
r
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p
e
r
t
y
u
n
d
e
r
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d
A
S
4
0
s
h
a
l
l
u
s
e
t
h
e
c
o
s
t
m
o
d
e
l
u
n
d
e
r
t
h
i
s
s
t
a
n
d
a
r
d
f
o
r
o
w
n
e
d
i
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
y
.
Bearer plant
i
s
a
p
l
a
n
t
t
h
a
t
:
(
a
)
i
s
u
s
e
d
i
n
t
h
e
p
r
o
d
u
c
t
i
o
n
/
s
u
p
p
l
y
o
f
a
g
r
i
c
u
l
t
u
r
a
l
p
r
o
d
u
c
e
;
(
b
)
i
s
e
x
p
e
c
t
e
d
t
o
b
e
a
r
p
r
o
d
u
c
e
f
o
r
more than a period;
a
n
d
(
in a way
life is spread between two financial years )
(
c
)
h
a
s
a
r
e
m
o
t
e
l
i
k
e
l
i
h
o
o
d
o
f
b
e
i
n
g
s
o
l
d
as a
n
agricultural produce
,
e
x
c
e
p
t
f
o
r
i
n
c
i
d
e
n
t
a
l
s
c
r
a
p
s
a
l
e
s
.
The following picture helps you to
understand
Definitions

12. 174
I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
Illustration 1
A public limited company whose main object as stated in its MOA is to purchase,
acquire, contract, develop, cultivate and sell agricultural and urban lands, buys
large plots of virgin lands, develops and cultivates them and sells them in small
plots. Land purchased by the company and the cost of development has been
consistently grouped under Fixed assets in its BS. Comment.
Answer
As per Ind AS 16, PPE is a tangible asset which is held for (intention of usage)
producing goods, providing services, rental to others or administration purpose.
The main basis for classification is intention of usage of the asset rather than the
nature of the entity.
As per Ind AS 2, inventory is an asset which is held for sale in the ordinary course
of business and etc.
In the given case, the entity is purchasing the land to develop and sell it in the
ordinary course of business. The land does not satisfy the definition of a PPE as
per Ind AS 16. But it satisfies the definition of inventory as per Ind AS 2. Hence
classifying it as inventory and presenting under current assets would be correct.
The accounting treatment of the company is NOT correct.
Carrying amount
:
`
G
r
o
s
s
b
o
o
k
v
a
l
u
e
X
X
X
Less:
A
c
c
u
m
u
l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
(
X
X
)
Less:
A
c
c
u
m
u
l
a
t
e
d
i
m
p
a
i
r
m
e
n
t
l
o
s
s
(
if any
)
(
X
X
)
Carrying amount XXX
Recognition and Measurement
Recognition Measurement
Initial
Recognition Measurement
It is the time when the entity
incurred the costs.
Subsequent
Recognition measurement
Measurement of PPE after Initial
recognition
Example on the balance sheet date

13. I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
175
P
P
E
s
h
o
u
l
d
b
e
r
e
c
o
g
n
i
s
e
d
i
n
t
h
e
b
o
o
k
s
o
f
a
c
c
o
u
n
t
w
h
e
n
i
t
s
a
t
i
s
f
i
e
s
t
h
e
f
o
l
l
o
w
i
n
g
t
w
o
c
o
n
d
i
t
i
o
n
s
:
(
same as “ASSET” conditions
)
1
.
P
r
o
b
a
b
l
e
f
u
t
u
r
e
e
c
o
n
o
m
i
c
b
e
n
e
fi
t
s
i
n
fl
o
w
s
t
o
t
h
e
e
n
t
i
t
y
;
a
n
d
2
.
C
o
s
t
s
h
o
u
l
d
b
e
m
e
a
s
u
r
e
d
r
e
l
i
a
b
l
y
.
Initial Recognition
An item of PPE that qualifies for recognition as an asset should be measured
at its COST.
C
o
s
t
s
a
r
e
i
n
c
u
r
r
e
d
:
(
a
)
A
t
t
h
e
t
i
m
e
o
f
i
n
i
t
i
a
l
a
c
q
u
i
s
i
t
i
o
n
or
s
e
l
f
c
o
n
s
t
r
u
c
t
i
o
n
o
f
P
P
E
;
(
b
)
S
u
b
s
e
q
u
e
n
t
l
y
t
o
a
d
d
/
i
n
c
r
e
a
s
e
t
o
t
h
e
e
x
i
s
t
i
n
g
P
P
E
,
r
e
p
l
a
c
e
a
p
a
r
t
o
r
s
e
r
v
i
c
e
i
t
.
A
m
o
u
n
t
t
o
b
e
c
a
p
i
t
a
l
i
s
e
d
i
s
b
a
s
e
d
o
n
t
h
e
n
a
t
u
r
e
o
f
c
o
n
s
i
d
e
r
a
t
i
o
n
p
a
i
d
f
o
r
t
h
e
a
s
s
e
t
.
P
P
E
c
a
n
b
e
a
c
q
u
i
r
e
d
i
n
t
h
e
f
o
l
l
o
w
i
n
g
w
a
y
s
:
-
Initial acquisition/construction
Asset is acquired by
Payment of Cash/
for credit
Exchange of Non
monetary assets
A. IF ASSET IS PURCHASED BY PAYMENT OF CASH/FOR CREDIT
OR SELF CONSTRUCTION
Cost of asset includes the following
Particulars Amount
(`)
P
u
r
c
h
a
s
e
p
r
i
c
e
(
B
a
s
i
c
p
r
i
c
e
)
X
X
X
(
+
)
Non-refundable
t
a
x
e
s
i
m
p
o
r
t
d
u
t
i
e
s
;
X
X
X
(
+
)
I
n
i
t
i
a
l
d
e
l
i
v
e
r
y
a
n
d
h
a
n
d
l
i
n
g
c
o
s
t
s
;
X
X
X
(
+
)
C
o
s
t
o
f
e
m
p
l
o
y
e
e
b
e
n
e
fi
t
s
a
r
i
s
i
n
g
f
r
o
m
t
h
e
c
o
n
s
t
r
u
c
t
i
o
n
o
r
a
c
q
u
i
s
i
t
i
o
n
o
f
P
P
E
;
X
X
X
(
+
)
S
i
t
e
p
r
e
p
a
r
a
t
i
o
n
c
o
s
t
X
X
X
(
+
)
I
n
s
t
a
l
l
a
t
i
o
n
a
n
d
A
s
s
e
m
b
l
y
c
o
s
t
s
X
X
X
(
+
)
C
o
s
t
o
f
t
e
s
t
i
n
g
(
T
e
s
t
r
u
n
o
r
E
x
p
e
r
i
m
e
n
t
a
l
p
r
o
d
u
c
t
i
o
n
)
w
h
e
t
h
e
r
t
h
e
a
s
s
e
t
s
i
s
f
u
n
c
t
i
o
n
i
n
g
a
p
p
r
o
p
r
i
a
t
e
l
y
after deducting net proceeds
of samples produced at the time of testing
(
+
)
P
r
o
f
e
s
s
i
o
n
a
l
f
e
e
s
(
e
.
g
.
f
e
e
s
o
f
a
r
c
h
i
t
e
c
t
s
a
n
d
e
n
g
i
n
e
e
r
s
)
X
X
X
(
+
)
B
o
r
r
o
w
i
n
g
c
o
s
t
(
I
f
p
e
r
m
i
t
t
e
d
b
y
I
n
d
A
S
2
3
)
X
X
X

14. 176
I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
Particulars Amount
(`)
(
+
)
L
e
a
s
e
s
o
f
a
s
s
e
t
s
t
h
a
t
a
r
e
u
s
e
d
t
o
c
o
n
s
t
r
u
c
t
,
a
d
d
t
o
,
r
e
p
l
a
c
e
p
a
r
t
o
f
o
r
s
e
r
v
i
c
e
a
n
i
t
e
m
o
f
P
P
E
,
s
u
c
h
a
s
d
e
p
r
e
c
i
a
t
i
o
n
o
f
r
i
g
h
t
-
o
f
-
u
s
e
a
s
s
e
t
(
R
O
U
A
)
a
s
p
e
r
I
n
d
A
S
1
1
6
;
X
X
X
(+) PRESENT VALUE of Decommissioning, restoration costs
(
S
e
e
below illustration
)
(
+
)
Any directly attributable cost to bring the asset to the location
condition necessary to operate for its intended purpose
X
X
X
(
+
/
-
)
S
u
b
s
e
q
u
e
n
t
p
r
i
c
e
a
d
j
u
s
t
m
e
n
t
s
X
X
X
(
+
/
-
)
C
h
a
n
g
e
s
i
n
d
u
t
i
e
s
a
n
d
s
i
m
i
l
a
r
i
t
e
m
s
X
X
X
(
-
)
G
o
v
e
r
n
m
e
n
t
g
r
a
n
t
r
e
c
e
i
v
e
d
s
p
e
c
i
fi
c
t
o
t
h
e
a
s
s
e
t
a
s
p
e
r
I
n
d
A
S
2
0
(
a
s
p
e
r
t
h
e
c
o
m
p
a
n
y
’
s
a
c
c
o
u
n
t
i
n
g
p
o
l
i
c
y
i
n
t
h
i
s
r
e
g
a
r
d
)
X
X
X
(
-
)
T
r
a
d
e
d
i
s
c
o
u
n
t
s
a
n
d
r
e
b
a
t
e
s
(
i
f
i
n
c
l
u
d
e
d
i
n
a
b
o
v
e
i
t
e
m
s
)
(
X
X
X
)
Cost of PPE to be capitalised XXXX
Costs does not include
(
a
)
c
o
s
t
s
o
f
o
p
e
n
i
n
g
a
n
e
w
f
a
c
i
l
i
t
y
;
(
b
)
c
o
s
t
s
o
f
i
n
t
r
o
d
u
c
i
n
g
a
n
e
w
p
r
o
d
u
c
t
o
r
s
e
r
v
i
c
e
(
i
n
c
l
u
d
i
n
g
c
o
s
t
s
o
f
a
d
v
e
r
t
i
s
i
n
g
a
n
d
p
r
o
m
o
t
i
o
n
a
l
a
c
t
i
v
i
t
i
e
s
)
;
(
c
)
c
o
s
t
s
o
f
c
o
n
d
u
c
t
i
n
g
b
u
s
i
n
e
s
s
i
n
a
n
e
w
l
o
c
a
t
i
o
n
o
r
w
i
t
h
a
n
e
w
c
l
a
s
s
o
f
c
u
s
t
o
m
e
r
(
i
n
c
l
u
d
i
n
g
c
o
s
t
s
o
f
s
t
a
f
f
t
r
a
i
n
i
n
g
)
;
(
d
)
a
d
m
i
n
i
s
t
r
a
t
i
o
n
a
n
d
o
t
h
e
r
g
e
n
e
r
a
l
o
v
e
r
h
e
a
d
c
o
s
t
s
;
(
e
)
i
n
i
t
i
a
l
o
p
e
r
a
t
i
n
g
l
o
s
s
e
s
,
s
u
c
h
a
s
t
h
o
s
e
i
n
c
u
r
r
e
d
w
h
i
l
e
d
e
m
a
n
d
f
o
r
t
h
e
i
t
e
m
’
s
o
u
t
p
u
t
b
u
i
l
d
s
u
p
;
(
f
)
c
o
s
t
s
o
f
r
e
l
o
c
a
t
i
n
g
o
r
r
e
o
r
g
a
n
i
s
i
n
g
p
a
r
t
o
r
a
l
l
o
f
a
n
e
n
t
i
t
y
’
s
o
p
e
r
a
t
i
o
n
s
;
a
n
d
(
g
)
c
o
s
t
s
i
n
c
u
r
r
e
d
w
h
i
l
e
a
n
i
t
e
m
c
a
p
a
b
l
e
o
f
o
p
e
r
a
t
i
n
g
i
n
t
h
e
m
a
n
n
e
r
i
n
t
e
n
d
e
d
b
y
m
a
n
a
g
e
m
e
n
t
h
a
s
y
e
t
t
o
b
e
b
r
o
u
g
h
t
i
n
t
o
u
s
e
o
r
i
s
o
p
e
r
a
t
e
d
a
t
l
e
s
s
t
h
a
n
f
u
l
l
c
a
p
a
c
i
t
y
;
G
e
n
e
r
a
l
a
d
m
i
n
i
s
t
r
a
t
i
o
n
a
n
d
o
t
h
e
r
o
v
e
r
h
e
a
d
e
x
p
e
n
s
e
s
a
r
e
u
s
u
a
l
l
y
e
x
c
l
u
d
e
d
f
r
o
m
t
h
e
c
o
s
t
a
s
t
h
e
y
a
r
e
not
r
e
l
a
t
e
d
t
o
s
p
e
c
i
f
i
c
a
s
s
e
t
.
H
o
w
e
v
e
r
,
a
n
y
e
x
p
e
n
s
e
i
f
directly attributable
t
o
c
o
n
s
t
r
u
c
t
i
o
n
o
f
a
p
r
o
j
e
c
t
o
r
a
c
q
u
i
s
i
t
i
o
n
o
f
P
P
E
o
r
t
o
b
r
i
n
g
i
t
t
o
w
o
r
k
i
n
g
c
o
n
d
i
t
i
o
n
f
o
r
i
t
s
i
n
t
e
n
d
e
d
p
u
r
p
o
s
e
,
i
t
s
h
o
u
l
d
b
e
i
n
c
l
u
d
e
d
i
n
t
h
e
c
o
s
t
o
f
P
P
E
.
T
h
e
c
o
s
t
o
f
a
n
i
t
e
m
o
f
P
P
E
m
a
y
i
n
c
l
u
d
e
c
o
s
t
s
i
n
c
u
r
r
e
d
r
e
l
a
t
i
n
g
t
o
l
e
a
s
e
s
o
f
a
s
s
e
t
s
t
h
a
t
a
r
e
u
s
e
d
t
o
c
o
n
s
t
r
u
c
t
,
a
d
d
t
o
,
r
e
p
l
a
c
e
p
a
r
t
o
f
o
r
s
e
r
v
i
c
e
a
n
i
t
e
m
o
f
P
P
E
,
s
u
c
h
a
s
d
e
p
r
e
c
i
a
t
i
o
n
o
f
r
i
g
h
t
-
o
f
-
u
s
e
a
s
s
e
t
s
(
I
n
d
A
S
1
1
6
)
.

15. I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
177
Note:
D
i
r
e
c
t
l
y
a
t
t
r
i
b
u
t
a
b
l
e
e
x
p
e
n
s
e
m
e
a
n
s
,
t
h
e
s
e
e
x
p
e
n
s
e
s
would have not
been incurred
i
f
t
h
e
P
P
E
i
s
n
o
t
a
c
q
u
i
r
e
d
o
r
c
o
n
s
t
r
u
c
t
e
d
.
Other points to be noted
u
I
t
e
m
s
s
u
c
h
a
s
spareparts,stand-byequipmentandservicingequipment
a
r
e
r
e
c
o
g
n
i
s
e
d
a
s
p
e
r
t
h
i
s
I
n
d
A
S
w
h
e
n
t
h
e
y
m
e
e
t
t
h
e
d
e
fi
n
i
t
i
o
n
o
f
P
P
E
.
O
t
h
e
r
w
i
s
e
,
s
u
c
h
i
t
e
m
s
a
r
e
c
l
a
s
s
i
fi
e
d
a
s
i
n
v
e
n
t
o
r
y
a
n
d
r
e
c
o
g
n
i
s
e
d
i
n
c
o
n
s
u
m
p
t
i
o
n
w
h
e
n
e
v
e
r
t
h
e
e
n
t
i
t
y
s
t
a
r
t
e
d
u
s
i
n
g
t
h
e
s
a
m
e
;
u
I
t
m
a
y
b
e
a
p
p
r
o
p
r
i
a
t
e
t
o
aggregate individually insignificant items
,
s
u
c
h
a
s
m
o
u
l
d
s
,
t
o
o
l
s
a
n
d
d
i
e
s
,
a
n
d
t
o
a
p
p
l
y
t
h
e
c
r
i
t
e
r
i
a
t
o
t
h
e
a
g
g
r
e
g
a
t
e
v
a
l
u
e
;
u
A
s
s
e
t
s
a
c
q
u
i
r
e
d
f
o
r
s
a
f
e
t
y
o
r
e
n
v
i
r
o
n
m
e
n
t
a
l
r
e
a
s
o
n
s
-
i
t
w
o
n
t
b
r
i
n
g
f
u
t
u
r
e
e
c
o
n
o
m
i
c
b
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n
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fi
t
s
b
u
t
t
h
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s
e
a
r
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c
e
s
s
a
r
y
f
o
r
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e
n
t
i
t
y
t
o
b
r
i
n
g
f
u
t
u
r
e
e
c
o
n
o
m
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c
b
e
n
e
fi
t
s
f
r
o
m
o
t
h
e
r
a
s
s
e
t
s
-
h
e
n
c
e
t
h
e
s
e
a
r
e
a
l
s
o
r
e
c
o
g
n
i
s
e
d
a
s
P
P
E
;
Illustration 2
On 1 April 2015, X Limited began the construction of a new factory. Costs relating
to the factory, incurred in the year ended 31 March 2016, are as follows:
Particulars Amount (` in
thousands)
Cost of dismantling existing structures on the site (demolition cost) 500
Material consumed to construct the factory 6,000
Employment costs (Note 1) 1,800
Other costs directly related to the construction (Note 2) 1200
General administrative overheads (not involved in factory construction) 600
Architects’ and consultants’ fees directly related to the construction 400
Costs of relocating staff who are to work at the factory 300
Costs relating to the formal opening of the factory 200
Note 1: The factory was constructed in the eight months ended 30 November 2015.
It was brought into use on 31 December 2015. The employment costs are for the
nine months to 31 December 2015. The employees were engaged in construction
and related activities.
Note 2: Other costs directly related to the construction include an abnormal cost
of ` . 200, in respect of repairing the damage which resulted from a gas leak.
What will be the initial carrying value of the factory building?

16. 178
I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
Answer
Calculation of cost of new factory
Particulars Amount
(` in
thousands)
Amount
capitalised
(` in
thousands)
Remarks
Costs of dismantling exist-
ing structures on the site
(demolition costs)
500 500 Site preparation costs which are
directlyattributabletothebuilding
(cost of getting the asset ready for
use in the manner intended by the
management)
Material consumed to
construct the factory
6,000 6,000 Directly attributable cost
Employment costs 1,800 1,600 Employmentcostsfortheperiodof
8monthsaredirectlyattributable.
Therefore, costs to be capitalised
is ` 1600 (i.e., 8/9 x 1,800)
Othercostsdirectlyrelated
to the construction
1200 1,000 Directlyattributablecostexcluding
abnormal cost
General administrative
overheads
600 Nil General overhead costs are
not costs of PPE unless if it can
be clearly demonstrated that
they are directly attributable to
construction
Architects’andconsultants’
fees directly related to the
construction
400 400 Architects’ fees should be
capitalised since it is a directly
attributable cost of getting the
asset ready for use.
Costs of relocating staff
who are to work at the
factory
300 Nil This is not required for getting the
asset ready for use
Costsrelatingtotheformal
opening of the factory
200 Nil Specifically disallowed by Ind AS
16. This is not required for getting
the asset ready for use
Total Cost 11,000 9,500
Illustration 3
Madhava Ltd. purchased plant machinery in the year 2016-17 for ` 45 lakh.
A balance of ` 5 lakh is still payable to the suppliers for the same. The supplier
waived off the balance amount during the financial year 2019-20. The company

17. I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
179
treated it as income and credited to profit loss account during 2019-20. Is the
accounting treatment of the company correct? If not, state with reasons.
Answer
As per Ind AS 16, the cost of PPE may undergo changes subsequent to its acquisition
or construction on account of liabilities, price adjustments, and changes in duties
or similar factors.
The amount payable to the supplier is a financial liability as per Ind AS 109. Hence,
we feel that treating as a gain on extinguishment of financial liability as per Ind AS
109 is appropriate and should be recognised as income in PL;
Illustration 4
On 1-04-2016, Vishnu Limited installed a machine in the rented premises at a
cost of ` 25 lakh, whose life is 3 years. As per the rental agreement, the machine
should be decommissioned and the building should be brought into the original
position. The company should incur ` 4,00,000 at the end of the 3rd year to
restore the premises into the original position. Assume borrowing rate applicable
to the entity is 10%.
Answer
As per Ind AS 16, costs include decommissioning or restoration costs. The entity
should capitalise the present value of such costs to be incurred in the future. For
discounting,weshouldusebeforetaxborrowingrateapplicabletothespecificentity.
Considering the above, present value decommissioning costs @ 10% (PVF =
0.751) = ` 4,00,000 × 0.751 = ` 3,00,400. (Refer Ind AS 37 for unwinding
the discounting)
Total cost of PPE to be capitalised = ` 25 lakh + ` 3,00,400 = ` 28,00,400.
This point is discussed in depth again in Ind AS 37)
Illustration 5
As per the accounting policy of Vamana Ltd., it fully (100%) depreciates in the year
of purchase the assets whose cost is less than ` 50,000 as it is immaterial for the
company. Can the company do so?
Answer
As per Preface to Ind AS, any Ind AS is applicable only for material items. Materiality
isamatterofprofessionaljudgmentanditdependsonsize,natureandcircumstances
of every situation.
As per Ind AS 16, Management of the entity may decide to expense an item to
PL which could otherwise have been included as property, plant and equipment,
because the amount of the expenditure is not material.

18. 180
I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
Considering the above discussion, management decision to charge the entire
amount to PL is acceptable.
Illustration 6
Trivikrama Ltd. purchased machinery for ` 80 lakhs from X Ltd. during 2017-18
and installed the same immediately. Price includes GST of ` 8 lakhs. During the
year 2017-18, the company produced taxable goods on which GST of ` 17.20
lakhs was charged. Give necessary entries explaining the treatment of input tax
credit (ITC).
Answer
As per Ind AS 16, non-refundable taxes should be capitalised as cost of the fixed
asset. As per ITC rules, GST paid on capital goods can be utilised 100% when it
is used for taxable goods/services.
The entity should record the following journal entries
Debit
(` in lakhs)
Credit
(` in lakhs)
Machinery a/c………..Dr 72
GST Input tax credit ….…Dr 8
To Bank a/c or Creditors a/c (being machinery
is capitalised)
80
GST payable a/c……………Dr 17.2
To GST Input tax credit 8
To Bank 9.2
(Being ITC set off with the GST paid and remaining
is paid)
Illustration 7
ABC Ltd. is setting up a new refinery outside the city limits. In order to facilitate
the construction of the refinery and its operations, ABC Ltd. Is required to incur
expenditure on the construction/development of railway siding, road and bridge.
Though ABC Ltd. incurs (or contributes to) the expenditure on the construction/
development, it will not have ownership rights on these items and they are
also available for use to other entities and public at large. Whether ABC Ltd.
can capitalise expenditure incurred on these items as property, plant and equipment
(PPE)? If yes, how should these items be depreciated and presented in the financial
statements of ABC Ltd.?

19. I
N
D
A
S
1
6
:
P
R
O
P
E
R
T
Y
,
P
L
A
N
T
A
N
D
E
Q
U
I
P
M
E
N
T
(
P
P
E
)
181
Answer
As per Ind AS 16, PPE should be recognised in the books of account when it satisfies
the following two conditions:
1. Probable future economic benefits inflows to the entity; and
2. Cost should be measured reliably.
The cost of PPE comprise any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner
intended by management
In the given case, railway siding, road and bridge are required to facilitate the
construction of the refinery and for its operations. Expenditure on these items is
required to be incurred in order to get future economic benefits from the project
as a whole which can be considered as the unit of measure for the purpose of
capitalisation of the said expenditure even though the company cannot restrict
the access of others for using the assets individually.
It is apparent that the aforesaid expenditure is directly attributable to bringing the
asset to the location and condition necessary for it to be capable of operating in
the manner intended by management.
In view of this, even though ABC Ltd. may not be able to recognise expenditure
incurred on these assets as an individual item of PPE in many cases (where it
cannot restrict others from using the asset), expenditure incurred may be capitalised
as a part of overall cost of the project. From this, it can be concluded that, in the
extant case the expenditure incurred on these assets, i.e., railway siding, road and
bridge,shouldbeconsideredasthecostofconstructingtherefineryandaccordingly,
expenditure incurred on these items should be allocated and capitalised as part of
the items of PPE of the refinery.
Depreciation
u If these assets have a useful life which is different from the useful life of the
item of PPE to which they relate, it should be depreciated separately.
u However, if these assets have a useful life and the depreciation method that
are the same as the useful life and the depreciation method of the item of
PPE to which they relate, these assets may be grouped in determining the
depreciation charge.
u Thisdoesnotchangeeventhoughtheseitemsarenotrecognisedasseparate
assets;
u The useful lives of these assets should not exceed that of the asset to which
it relates.

20. Rs. 2295
AUTHOR : RAVI KANTH MIRIYALA, SUNITANJANI MIRIYALA
PUBLISHER : TAXMANN
DATE OF PUBLICATION : AUGUST 2021
EDITION : 1ST EDITION
ISBN NO : 9789391596408
NO. OF PAGES : 1352
BINDING TYPE : PAPERBACK
ORDER NOW
Ind AS
Ready Reckoner
Description
Ind AS Ready Reckoner is a simple practical workbook on Ind AS [as amended
by the Companies (Indian Accounting Standards) Amendment Rules 2021] to guide
the members in practice/employment in their day-to-day works. This book will help
the professionals cope with various developments in the accounting standards’
area, which has become complex after Ind AS has started aligning with its global
counterpart.
The Present Publication is the Latest Edition, authored by CA Ravi Kanth Miriyala
CA Sunitanjani Miriyala, amended up to July 2021, with the following noteworthy
features:
u
[Most Updated Amended] This book incorporates the latest amendments
under Companies (Indian Accounting Standards) (Amendment) Rules, 2021
u
[Practical Lucid Explanations/Illustrations/Process Flow Charts] are provided in
this book for members in practice/employment, to act as a one-stop reference
manual on complex matters, without diluting the content of Standards
u
[Definitions Applications Guidance with Basis of Conclusion] are incorporated
in critical chapters and wherever it is necessary to understand the reasoning
u
[FAQs Illustrative Examples] This book also incorporates FAQs of educational
material issued by the ICAI and illustrative examples issued by the IASB
u
[Ind AS vs AS Ind AS vs IFRS] Covers the differences between Ind AS AS as well
as Ind AS IFRS, at the end of every standard