Question 2 OR (a)

Property, plant and equipment, and the scope of AS 10

6 marks

Time to write: About 12 minutes
Topic: Depreciation, PPE and AS 10
Notes: Crux notes

Question

Question 2 OR (a) · 6 marks

Define Property, Plant and Equipment as per AS 10. Which items are not covered by the scope of PPE under AS 10?

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

12 minfor 6 marks

Read from the question

Define…Which…?2 asks, each with its own marks below. Answer both.

Write it in this order

Read; underline the asks; jot your points 1 min
1 Definition of PPE, with its two conditions 3 marks 5 min
2 Items not covered by AS 10, and the exceptions 3 marks 5 min
Check: every ask answered, key terms underlined 1 min

Easy marks

Step 1 opens with the meaning: a one-line definition, the quickest mark in it.

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Definition. Property, plant and equipment (PPE) “are tangible items that (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than a period of twelve months” (AS 10, para 6). Land, buildings, plant and machinery, furniture and vehicles used in the business are examples; goods held for sale are inventory, not PPE.

Items outside the scope of AS 10. AS 10 applies to PPE except where another standard requires or permits a different treatment. It does not apply to:

Biological assets related to agricultural activity, other than bearer plants. AS 10 does apply to bearer plants, but not to the produce growing on them.
Wasting assets, including mineral rights, and expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources.

However, AS 10 does apply to PPE used to develop or maintain those assets. Other standards may also set a different basis of recognition for some PPE: for example, AS 19 decides on the transfer of risks and rewards whether leased PPE is recognised, though AS 10 still governs its depreciation; and investment property under AS 13 uses only the cost model of AS 10.

Where the 6 marks sit

#	Component	Marks
1	Definition of PPE, with its two conditions	3
2	Items not covered by AS 10, and the exceptions	3
	Total	6

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