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

Sarthak Textiles Ltd. holds the following tangible items: (i) a loom used to weave cloth for sale, expected to last 8 years; (ii) stationery stock that will be consumed within three months; (iii) a computer used by the accounts department, expected to last 4 years; (iv) a machine let out on rental to a job-worker, expected to last 6 years. Which items meet the definition of property, plant and equipment under Ind AS 16?

The loom, the accounts computer and the rented machine are property, plant and equipment, because each is tangible, held for production, administration or rental, and used over more than one period. Stationery consumed within three months is not used over more than one period, so it is excluded.

  1. A(i), (iii) and (iv) onlyCorrect
  2. B(i) and (iii) only
  3. C(i), (ii), (iii) and (iv)
  4. D(i) and (iv) only

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 loom (production), the computer (administrative) and the rented machine (rental to others) all qualify. Stationery will be used within one period, so it fails the second test. Option B wrongly excludes the rented machine.

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