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CA Intermediate · Advanced Accounting · AS 10 Property, Plant and Equipment

Narmada Power Ltd bought a machine on 1 July 2024 for Rs 5,00,000 and used 10% straight line depreciation on cost with nil residual value. Which treatment does AS 10 require when the machine is retired from active use?

An item of PPE retired from active use and held for disposal is stated at the lower of its net book value and net realisable value and shown separately in the financial statements. Any resulting loss is recognised in the statement of profit and loss; it is not retained at cost.

  1. ARetire it and report it at the lower of book value and net realisable value, shown separately from PPECorrect
  2. BKeep it in PPE at cost until sold
  3. CTransfer it to investments at fair value
  4. DWrite it off to the revaluation reserve

Explanation

AS 10 requires that PPE retired from active use and held for disposal be stated at the lower of net book value and net realisable value, and shown separately in the financial statements. Any loss is recognised in the statement of profit and loss. Keeping it at cost ignores this requirement.

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