Ind AS 16 Disclosures and Differences from IAS 16

Understand Disclosures and Differences from IAS 16

Key rules to remember

Closing carrying amount (reconciliation)

Closing carrying amount = Opening carrying amount + Additions + Business combination acquisitions ± Revaluation changes ± Net exchange differences ± Other changes − Disposals and assets held for sale − Depreciation − Impairment losses + Impairment reversals

Show each line separately, for each class. Impairment and reversals recognised in profit or loss and in OCI are shown separately.

Carrying amount

Carrying amount = Gross carrying amount − Accumulated depreciation and accumulated impairment losses

Ind AS 16 asks for gross carrying amount and accumulated depreciation (aggregated with impairment losses) at the start and end of the period.

Disclosures per class (para 73)

Measurement bases | Depreciation methods | Useful lives or rates | Gross amount and accumulated depreciation | Reconciliation

Remember as five items. Write each one for every class.

Other mandatory disclosures (para 74)

Restrictions on title and pledges | Expenditure on assets under construction | Contractual commitments | Third-party compensation in profit or loss

Compensation is disclosed only if not shown separately on the face of the statement of profit and loss.

Revaluation disclosures (para 77)

Effective date | Independent valuer or not | Methods and significant assumptions | Carrying amount under cost model | Revaluation surplus movement and distribution restrictions

Required only for classes carried under the revaluation model.

Encouraged disclosures (para 79)

Temporarily idle assets | Fully depreciated assets still in use | Assets retired from active use and not held for sale | Fair value if cost model and materially different

These are encouraged, not mandatory. Examiners test this difference.

How to solve Disclosures and Differences from IAS 16 questions

1. 1Read the case and list the facts: which classes exist, which model each class uses, any pledges, commitments, impairments, revaluations or estimate changes.
2. 2Decide the type of question: a list of disclosures, a reconciliation to compute, a check of what is mandatory versus encouraged, or a difference from IAS 16.
3. 3For a list question, write the per-class items first (bases, methods, lives or rates, gross amount and accumulated depreciation, reconciliation). Then add the other mandatory items that the case facts trigger.
4. 4For a reconciliation, start with opening carrying amount. Add additions and acquisitions. Deduct disposals, depreciation and impairment. Adjust for revaluation and exchange differences. Match the result to the closing balance.
5. 5If any class is revalued, add the revaluation disclosures: date, valuer, methods and assumptions, cost-model carrying amount and surplus movement.
6. 6If a useful life, residual value or method changed, treat it as a change in estimate under Ind AS 8 and disclose its nature and effect.
7. 7For a differences question, say the standard is largely converged with IAS 16. Then state the specific point, such as the Ind AS 101 option (para D13AA) to continue the previous GAAP treatment of exchange differences on long-term foreign currency monetary items. Do not present the deemed cost option as a carve-out, because IFRS 1 has it too.
8. 8Close with a one-line conclusion that ties the disclosure to the case facts.

Quickest way: Five plus four plus revaluation checklist

Common mistakes in Disclosures and Differences from IAS 16

• Giving one reconciliation for total PPE instead of each class.

  Students focus on the totals in the balance sheet.

  Fix: Prepare a separate reconciliation for each class. State that totals alone do not meet the requirement.

• Treating encouraged disclosures as mandatory.

  Students memorise one long list without noting which paragraph it comes from.

  Fix: Keep two lists. Mandatory: para 73 and 74 items, plus para 77 for revalued classes. Encouraged: idle assets, fully depreciated assets in use, retired assets, fair value under cost model.

• Forgetting impairment and reversals in the reconciliation.

  Students stop at additions, disposals and depreciation.

  Fix: Add impairment and reversal lines, split between profit or loss and OCI where relevant.

• Disclosing revaluation details for classes carried at cost.

  Students apply para 77 to every class.

  Fix: Revaluation disclosures apply only to the classes revalued. Check the model for each class.

• Claiming many major differences between Ind AS 16 and IAS 16, or calling the deemed cost option an Ind AS carve-out.

  Students assume every Ind AS differs from IFRS in a big way and mix up IFRS 1 options with Ind AS 101 carve-outs.

  Fix: State that the core rules are the same. The deemed cost option exists in IFRS 1 and Ind AS 101 alike. Name only genuine points you are sure of, such as the Ind AS 101 option (para D13AA) on exchange differences on long-term foreign currency monetary items.

• Confusing a change in useful life with a change in accounting policy.

  Both change the depreciation charge.

  Fix: A change in useful life, residual value or depreciation method is a change in estimate under Ind AS 8. Apply it prospectively and disclose its nature and effect.

Worked examples