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CMA Final · Corporate Financial Reporting · Property, Plant and Equipment (Ind AS 16)

Ind AS 16 defines property, plant and equipment by reference to its use. Sutlej Textiles Ltd holds the following tangible items. Which item meets the definition of property, plant and equipment on the basis of the usage criteria alone?

The generator qualifies because it is a tangible item held for administrative purposes and expected to be used for more than one period. A machine held for sale is inventory, and cartons consumed within three months are not used over more than one period.

  1. AA weaving machine held for sale to customers in the ordinary course of business
  2. BA generator expected to be used for administrative purposes over the next eight yearsCorrect
  3. CA stock of spare cartons expected to be consumed within three months
  4. DA machine under negotiation that the entity does not intend to use or rent out

Explanation

PPE are tangible items held for production or supply of goods or services, for rental to others, or for administrative purposes, and expected to be used during more than one period. The generator satisfies both conditions. The machine for sale is inventory, and the cartons are used within one period.

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