Property, Plant and Equipment (AS 10) for CMA Inter

What this chapter covers

Property, Plant and Equipment (AS 10): topics in the order to study them

1. 1AS 10 Scope, Definitions and Recognition of PPEStart here because every later rule depends on knowing what counts as PPE and when an item is recognised as an asset.
2. 2Measurement of Cost of PPEOnce an item is recognised, you must know what goes into its cost, since depreciation and disposal results are built on that figure.
3. 3Depreciation and Useful Life under AS 10Depreciation is the systematic allocation of the depreciable amount over the useful life, and it is the most calculation-heavy part of the chapter.
4. 4Revaluation of PPE and Subsequent MeasurementAfter cost and depreciation are clear, you can handle the choice between the cost model and the revaluation model.
5. 5Retirement, Disposal and Derecognition of PPEThis closes the asset's life and uses the carrying amount you learned to compute in the earlier topics.
6. 6Disclosure Requirements and Practical Problems in AS 10Keep it last because it ties everything together and lets you practise mixed problems with the full set of rules.

How to prepare Property, Plant and Equipment (AS 10)

1. Learn the definitions of PPE, useful life, depreciation and cost in the standard's own meaning, and write each in one line from memory.
2. For cost, list what is included and what is not, then test yourself with a purchase example where you add and exclude items one by one.
3. Practise depreciation on the straight-line and written-down value methods, including part-year assets, and always show the working for each year.
4. Note that an enterprise chooses either the cost model or the revaluation model and applies that policy to an entire class of PPE. Practise a revaluation problem and a disposal problem on the same asset.
5. Memorise the disclosure list by class of asset, then practise a reconciliation of the opening and closing carrying amount.
6. Finish with mixed past-style questions. Solve the MCQs fast, and write the long answers with a clear cost statement, depreciation working and ledger or note format so each step earns marks.

Common mistakes in Property, Plant and Equipment (AS 10)

• Treating any long-lived item as PPE without checking both conditions.

  Fix: Check both: the item must be tangible and held for the stated purposes, and expected to be used for more than twelve months.

• Applying the cost model to one asset and the revaluation model to another within the same class.

  Fix: Remember that the policy is applied to an entire class of PPE. Pick the model per class, not per item.

• Depreciating on the wrong base or for the wrong period.

  Fix: Write the depreciable amount, rate and months in separate lines before calculating, and recheck the date of use or sale.

• Forgetting to derecognise a replaced part when its replacement cost is capitalised.

  Fix: Whenever you capitalise a replacement, remove the carrying amount of the part replaced.

• Computing profit or loss on disposal from original cost instead of carrying amount.

  Fix: Bring depreciation up to the date of disposal first, then compare sale proceeds with the carrying amount.

• Giving a long answer with no structure or incomplete disclosure points.

  Fix: Use headings in your answer for cost, depreciation and disclosure, and learn the disclosure list item by item so no step marks are lost.

Last-day revision: Property, Plant and Equipment (AS 10)

• ✓PPE is tangible, held for production, supply, rental or administration, and expected to be used for more than twelve months.
• ✓Initial measurement of an item that qualifies for recognition is at cost.
• ✓Cost is cash or cash equivalents paid, or the fair value of other consideration given, at the time of acquisition or construction.
• ✓Depreciation is the systematic allocation of the depreciable amount over the useful life.
• ✓Useful life can be a period of expected use or the number of production or similar units expected.
• ✓Choose either the cost model or the revaluation model and apply it to an entire class of PPE.
• ✓Under revaluation, carry the asset at fair value at the revaluation date less later depreciation and impairment, and revalue regularly enough to avoid material difference.
• ✓Revaluation needs a fair value that can be measured reliably.
• ✓Significant parts with the same useful life and method may be grouped for depreciation.
• ✓The cost of replacing a part is recognised in the carrying amount if the recognition criteria are met, and the replaced part is derecognised.
• ✓Changes in residual value, useful life or depreciation method are changes in estimate and need disclosure.
• ✓Disclose, per class, the measurement basis, depreciation methods, useful lives or rates, gross and accumulated amounts, and a reconciliation of carrying amounts.

Property, Plant and Equipment (AS 10) practice questions

• Which one of the following is NOT among the changes in estimates for which AS 10 says disclosure under AS 5 may arise?
• Under AS 10, how is the cost of an item of PPE held by a lessee under a finance lease determined?
• Which of the following items satisfies the AS 10 definition of property, plant and equipment?
• As defined in AS 10, depreciation is best described as:
• Which of the following items would NOT meet the AS 10 definition of property, plant and equipment in the books of Kaveri Motors Ltd, a car d…
• Under AS 10, when must the carrying amount of an item of property, plant and equipment be derecognised?
• Under AS 10 (Property, Plant and Equipment), which of the following items is only ENCOURAGED to be disclosed, and not required to be disclos…
• Under AS 10, useful life of an asset may be expressed as:

Property, Plant and Equipment (AS 10) in other exams

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

• CA FinalInd AS 16 Property, Plant and Equipment
• CMA FinalProperty, Plant and Equipment (Ind AS 16)
• CA IntermediateAS 10 Property, Plant and Equipment
• CA FoundationInventories