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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Himalaya Foods Ltd buys a packing machine and, at initial recognition, the machine qualifies for recognition as an asset under AS 10. Which statement follows from the quoted text of the standard about its initial measurement and about the standard's overall scope?

A qualifying item of PPE is measured at its cost on initial recognition, and AS 10 is applied unless another Accounting Standard requires or permits a different accounting treatment. It does not override other standards, nor does it use fair value or net realisable value at recognition.

  1. AIt is measured at its cost, and AS 10 applies to PPE unless another Accounting Standard requires or permits a different treatmentCorrect
  2. BIt is measured at fair value, and AS 10 applies to all assets including inventories
  3. CIt is measured at its cost, and AS 10 always overrides any other Accounting Standard
  4. DIt is measured at net realisable value, and AS 10 applies only to land and buildings

Explanation

The text says an item of PPE that qualifies for recognition should be measured at its cost. The scope says AS 10 applies except when another Accounting Standard requires or permits a different treatment, so it does not always override other standards. Fair value and NRV are not the initial measurement basis, and the standard is not limited to land and buildings.

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