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CA Final · Financial Reporting · Ind AS 16 Property, Plant and Equipment

Sagar Textiles Ltd holds the following items at its Surat plant: (i) a loom used to weave fabric for sale, expected to be used for 8 years; (ii) a stock of spare needles consumed within a few weeks of purchase; (iii) a office server used for administration, expected life 5 years; (iv) a building let out to a third party for rent. Applying the definition of property, plant and equipment in Ind AS 16, which of the items qualifies as PPE?

Only the loom and the office server qualify. PPE must be tangible, held for production, supply, rental or administration, and expected to be used over more than one period. Needles are consumed within a period, and a building let out for rent is investment property under Ind AS 40, not PPE.

  1. AItems (i) and (iii) onlyCorrect
  2. BItems (i), (ii) and (iii) only
  3. CItems (i) and (iv) only
  4. DItem (iii) only

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 for more than one period. The loom and the server meet both tests. The needles are used within one period. The Standard text as modified in Ind AS covers rental, but the let-out building is covered by Ind AS 40 (investment property, as noted in the modification of paragraph 5), so it is not Ind AS 16 PPE.

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