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

Sahyadri Textiles Ltd holds a standby generator that it uses only to supply power to its own weaving unit and administrative block. It expects to use the generator for more than one accounting period. Under Ind AS 16, which feature makes this generator qualify as property, plant and equipment?

The generator qualifies because it is a tangible item held for use in production or administrative purposes and expected to be used for more than one period. Both conditions in the Ind AS 16 definition are met, so it is property, plant and equipment rather than inventory or investment property.

  1. AIt is a tangible item held for use in production or administrative purposes and expected to be used during more than one periodCorrect
  2. BIt is an intangible item expected to generate revenue directly from external customers within one year
  3. CIt is held solely for capital appreciation and rental income from unrelated parties
  4. DIt is held for sale in the ordinary course of business and expected to be sold within twelve months

Explanation

Ind AS 16 defines property, plant and equipment as tangible items held for use in 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 meets both limbs. The option on capital appreciation describes investment property, and the held-for-sale option describes inventory, so neither fits.

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