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

Sarthak Textiles Ltd holds the following items at the reporting date: (i) a weaving machine used in its own mill, (ii) a spare standby generator used for more than one year in the administrative block, (iii) raw cotton bales held for conversion into yarn, and (iv) a van let out to a transporter on rent. Which of the items is NOT within the definition of property, plant and equipment under Ind AS 16?

Raw cotton bales are not property, plant and equipment because they are expected to be consumed within one period and are held for conversion, so they are inventory. The machine, generator and rented van are tangible, held for permitted purposes and used over more than one period.

  1. AWeaving machine used in its own mill
  2. BStandby generator used in the administrative block
  3. CRaw cotton bales held for conversion into yarnCorrect
  4. DVan let out to a transporter on rent

Explanation

Ind AS 16 defines PPE as 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 machine, generator and rented van meet both limbs. Cotton bales are consumed in one period and are inventory, so they fail the definition.

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