Financial Accounting · Tangible non-current assets

IAS 16 Disclosure and Presentation of Property, Plant and Equipment

Updated 11 October 2026 · Fact-checked

IAS 16 requires property, plant and equipment to be shown in the statement of financial position at carrying amount (cost or revalued amount less accumulated depreciation and impairment). The note discloses each class's measurement basis, depreciation methods and lives, and a reconciliation of opening to closing carrying amount. To solve questions, build that reconciliation.

Understand IAS 16 Disclosure and Financial Statement Presentation

Property, plant and equipment (PPE) are tangible assets a business holds to use in producing goods or services, to rent to others or for administration, and expects to use for more than one period. IAS 16 Property, Plant and Equipment sets the rules for how they are measured and disclosed.

On the face of the statement of financial position, PPE appears as one line under non-current assets. The figure is the carrying amount: cost (or revalued amount) less accumulated depreciation and any impairment losses. The detail sits in a note, so the face stays clear.

IAS 16 lets you choose one of two models for each class of PPE (for example land and buildings, or plant and machinery). Under the cost model, the asset is carried at cost less accumulated depreciation and impairment. Under the revaluation model, the asset is carried at fair value at the revaluation date less later depreciation and impairment. Revaluations must be made often enough that carrying amount does not differ materially from fair value. If you revalue one asset, you must revalue all assets in its class.

A revaluation gain is credited to the revaluation surplus in equity and shown in other comprehensive income. The exception is a gain that reverses an earlier revaluation decrease on the same asset that was charged to profit or loss. To that extent, the gain is recognised in profit or loss. A revaluation decrease is charged to profit or loss, unless it offsets an existing revaluation surplus on the same asset. In that case it is charged to other comprehensive income first, up to the balance of that surplus. Depreciation is then charged on the revalued amount.

The note for each class shows cost or valuation and accumulated depreciation at the start and end of the year, plus movements: additions, disposals, revaluations, impairment and the depreciation charge. This is the reconciliation of carrying amount. It must also state the measurement bases, depreciation methods and useful lives or rates used.

Key formulas to remember

Carrying amount: Carrying amount = Cost (or valuation) − Accumulated depreciation − Impairment losses; This is the figure shown in the statement of financial position.
Reconciliation of carrying amount: Opening carrying amount + Additions + Revaluation increases − Revaluation decreases − Impairment losses − Disposals (at carrying amount) − Depreciation for the year = Closing carrying amount; Include every movement in the year, or the roll-forward will not reconcile. Layout is often shown as cost and accumulated depreciation columns instead. Both approaches reach the same closing figure.
Revaluation surplus: Revaluation surplus = Fair value − Carrying amount before revaluation; Credit to revaluation surplus (OCI) when positive, except to the extent the gain reverses an earlier revaluation decrease on the same asset that was charged to profit or loss. That part is recognised in profit or loss. A deficit is charged to profit or loss, except to the extent of any existing surplus on that asset, which is charged to OCI first.
Class rule: One model per class of PPE; revalue the whole class together; You may use different models for different classes, such as cost for plant and revaluation for land.
Annual depreciation (straight-line): (Cost − Residual value) ÷ Useful life; Applied on the cost or on the revalued amount, depending on the model.

How to solve IAS 16 Disclosure and Financial Statement Presentation questions

Use this method for any question on PPE presentation, the note or the choice of model.

1Identify the class of asset and which model applies (cost or revaluation).
2Write down opening cost or valuation and opening accumulated depreciation. Subtract to get opening carrying amount.
3List the year's movements: additions at cost, disposals, revaluations and the depreciation charge.
4Calculate depreciation on the correct base, using the revalued amount if the asset was revalued, and for the correct time period.
5Remove disposed assets from both cost and accumulated depreciation, not just from carrying amount.
6Total each column to find closing cost or valuation and closing accumulated depreciation, then deduct to get the closing carrying amount.
7Check that the closing carrying amount matches the statement of financial position figure, and that the depreciation charge matches profit or loss.
8For multiple choice questions, eliminate options that breach the rules, for example revaluing only one asset in a class.

Quickest way: Carrying amount roll-forward

When to use it: Use it for number entry or multiple choice questions that ask for the closing carrying amount or one missing movement.

Start from opening carrying amount, not opening cost.
Add additions and any revaluation increases.
Subtract the carrying amount of disposals, the year's depreciation, any impairment losses and any revaluation decreases.
If one figure is missing, rearrange the equation and solve for it.
Sense-check: the closing carrying amount should not exceed cost unless the asset has been revalued upward.

Common mistakes in IAS 16 Disclosure and Financial Statement Presentation

Showing PPE at cost on the statement of financial position instead of carrying amount.
Students focus on the cost column in the note and forget to deduct accumulated depreciation.
Fix: Always state the face figure as cost or valuation minus accumulated depreciation.
Revaluing only one building and leaving other buildings at cost.
Students treat each asset separately.
Fix: Remember the policy applies to the whole class. All assets in the class must be revalued together.
Crediting a revaluation gain to profit or loss.
It looks like income.
Fix: Credit the revaluation surplus in equity and show it in other comprehensive income. Exception: a gain reversing an earlier loss on the same asset that went through profit or loss.
Depreciating a revalued asset on its old cost.
Students forget that the carrying amount has changed.
Fix: After a revaluation, depreciate the revalued amount over the remaining useful life.
Deducting a disposal at sale proceeds in the reconciliation.
Confusing cash received with the asset's carrying amount.
Fix: Remove the asset at its carrying amount (cost less accumulated depreciation). The difference from proceeds is a gain or loss in profit or loss.
Using the depreciation charge for the year as total accumulated depreciation.
The two terms sound alike.
Fix: The charge is one year's expense. Accumulated depreciation is the total built up over the asset's life to date, less amounts on disposals.

Worked examples

Example 1

At 1 January, a company's machinery had cost $200,000 and accumulated depreciation $80,000. During the year it bought machinery for $50,000 and sold none. Depreciation for the year was $30,000. What is the closing carrying amount?

Show the solution

Opening carrying amount = $200,000 − $80,000 = $120,000.
Add additions: $120,000 + $50,000 = $170,000.
Deduct depreciation: $170,000 − $30,000 = $140,000.
Check by columns: closing cost = $250,000; closing accumulated depreciation = $80,000 + $30,000 = $110,000; carrying amount = $140,000.

Answer: $140,000

Example 2

A company uses the revaluation model for land and buildings. A building cost $600,000 and had accumulated depreciation of $150,000 at 31 December, after the year's depreciation was charged. It is revalued at $700,000 at that date. Remaining life is 20 years, with no residual value. State the revaluation surplus and the next year's depreciation.

Show the solution

Carrying amount before revaluation = $600,000 − $150,000 = $450,000.
Revaluation surplus = $700,000 − $450,000 = $250,000, credited to equity and shown in other comprehensive income.
The revaluation is made at the year end, so no depreciation falls between the last charge and the revaluation. Accumulated depreciation of $150,000 is eliminated and the gross amount is restated to $700,000 (one of the permitted methods under IAS 16), so the building is carried at $700,000.
Next year's depreciation = $700,000 ÷ 20 = $35,000.

Answer: Revaluation surplus $250,000; building carried at $700,000; annual depreciation $35,000

Exam tips

In the objective test, read whether the question asks for cost, accumulated depreciation or carrying amount. The options often include all three.
For multiple response questions on disclosure, pick the items that appear in the PPE note: measurement bases, depreciation methods and lives, and the carrying amount reconciliation.
Revaluation gain goes to the revaluation surplus; this is a regular true or false trap. Check for any earlier loss on the same asset before answering.
In Section B, lay out the note in columns for cost, depreciation and carrying amount. Marks follow each correct line, so show your workings.
Match classes: if the question says plant is at cost and land is revalued, apply each model separately to its own class.

Practice questions from Tangible non-current assets

IAS 16 Disclosure and Financial Statement Presentation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IAS 16 Disclosure and Financial Statement Presentation: frequently asked questions

What is the difference between the cost model and the revaluation model in IAS 16?

Under the cost model, PPE is carried at cost less accumulated depreciation and impairment. Under the revaluation model, it is carried at fair value at the revaluation date less later depreciation and impairment. The chosen model applies to a whole class of assets.

What must the IAS 16 note show?

For each class it shows the measurement basis, depreciation methods and useful lives or rates, and the gross carrying amount and accumulated depreciation. It also gives a reconciliation of opening to closing carrying amount covering additions, disposals, revaluations and depreciation.

Where does a revaluation surplus appear in the financial statements?

A revaluation gain is credited to other comprehensive income and accumulated in equity as the revaluation surplus. The exception is a gain that reverses a revaluation decrease on the same asset previously recognised in profit or loss. That part of the gain is recognised in profit or loss.

Can I revalue just one asset in a class?

No. If you choose the revaluation model, you must revalue the entire class of PPE to which the asset belongs. Revaluations must be frequent enough that carrying amount is not materially different from fair value.