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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Under AS 10, when must the carrying amount of an item of property, plant and equipment be derecognised?

AS 10 requires the carrying amount of an item of PPE to be derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Sale is just one way of disposal, and being fully depreciated or idle does not by itself require derecognition.

  1. AOnly when the item is sold to an outside party
  2. BOn disposal, or when no future economic benefits are expected from its use or disposalCorrect
  3. CWhenever the item becomes fully depreciated to its residual value
  4. DWhen the item has been idle for more than twelve months

Explanation

AS 10 requires derecognition of the carrying amount on disposal or when no future economic benefits are expected from use or disposal. Sale is only one form of disposal; the standard also lists finance lease and donation. Full depreciation or idleness alone does not trigger derecognition.

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