Page 5 - 3. COMPILER QB - INDAS 16

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 recognize expenditure incurred on these assets as an

individual item of property, plant and equipment 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,
should be considered as the cost of constructing the refinery and accordingly, expenditure incurred on these

items should be allocated and capitalised as part of the items of property, plant and equipment of the refinery.

Depreciation
As per paragraph 43 and 47 of Ind AS 16, if these assets have a useful life which is different from the useful

life of the item of property, plant and equipment to which they relate, it should be depreciated separately.
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 property, plant and equipment to which they relate, these assets may be
grouped in determining the depreciation charge. Nevertheless, if it has been included in the cost of property,

plant and equipment as a directly attributable cost, it will be depreciated over the useful lives of the said
property, plant and equipment.

The useful lives of these assets should not exceed that of the asset to which it relates.

Presentation
These assets should be presented within the class of asset to which they relate.

Q4. (Exam - May 19 & May 20 & MTP March 2021 – 6 marks)

Company X performed a revaluation of all of its plant and machinery at the beginning of 2018-2019. The
following information relates to one of the machineries:

Amount (Rs000)
Gross carrying amount Rs 200

Accumulated depreciation (straight-line method) Rs 80
Net carrying amount Rs 120
Fair value Rs 150

The useful life of the machinery is 10 years and the company uses Straight line method of depreciation. The

revaluation was performed at the end of the 4th year.
How should the Company account for revaluation of plant and machinery and depreciation subsequent to

revaluation?

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