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Part I of Division II of Schedule III to Companies Act 2013 which is applicable to Financial Statements for a company whose financial statements are required to be drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015 prescribes the following line items are to be presented one the face of the Balance Sheet in relation to Non-current assets in the given format:
Name of the Company ……….
Balance Sheet as at ……………
Disclosures for Property, Plant and Equipment by way of Notes are given under Note 6(A) to General Instructions for Preparation of Balance Sheet of a company required to comply with Ind AS.
Property, Plant and Equipment:
i) Classification shall be given as:
a. Land
b. Buildings
c. Plant and Equipment
d. Furniture and Fixtures
e. Vehicles
f. Office equipment
g. Bearer Plant
h. Others (specify nature)
ii) Assets under the lease shall be separately specified under each class of assets
iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation (if the change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately.
While preparing disclosures by way of notes, some errors may occur, some of which have been identified by the Financial Reporting and Review Board (FRRB) of ICAI. To safeguard accountants from committing errors, some of the FRRB observations are discussed below:
Key Points to be considered while reporting under Property, Plant and Equipment
Key points considered by FRRB relating to presentation and disclosure of property, plant & equipment (PPE) in Ind AS financial statements.
For a better understanding, let's look at relevant abstracts from the published Annual Report for FY 2021-22.
Significant Accounting Policies for Property, Plant and Equipment of Asian Paints Ltd.
1.0 Measurement at recognition
1.1?An item of property, plant and equipment that qualifies as an asset is measured on initial recognition at cost. Following initial recognition, items of property, plant and equipment are carried at its cost less accumulated depreciation and accumulated impairment losses.
1.2?The Company identifies and determines cost of each part of an item of property, plant and equipment separately, if the part has a cost which is significant to the total cost of that item of property, plant and equipment and has useful life that is materially different from that of the remaining item.
1.3?The cost of an item of property, plant and equipment comprises of its purchase price including import duties and other non-refundable purchase taxes or levies, directly attributable cost of bringing the asset to its working condition for its intended use and the initial estimate of decommissioning, restoration and similar liabilities, if any. Any trade discounts and rebates are deducted in arriving at the purchase price. Cost includes cost of replacing a part of a plant and equipment if the recognition criteria are met. Expenses directly attributable to new manufacturing facility during its construction period are capitalized if the recognition criteria are met. Expenditure related to plans, designs and drawings of buildings or plant and machinery is capitalized under relevant heads of property, plant and equipment if the recognition criteria are met.
1.4?Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful life. Costs in nature of repairs and maintenance are recognized in the Statement of Profit and Loss as and when incurred.
1.5 The Company had elected to consider the carrying value of all its property, plant and equipment appearing in the Financial Statements prepared in accordance with Accounting Standards notified under section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and used the same as deemed cost in the opening Ind AS Balance Sheet prepared on 1st April, 2015.
2.0 De-recognition
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the de-recognition of an item of property, plant and equipment is measured as the difference between the net disposal proceeds and the carrying amount of the item and is recognized in the Statement of Profit and Loss when the item is derecognized.
Disclosure Notes on Plant, Property and Equipment of ITC Ltd.
Reference:
Click to read our previous story on "Disclosure of Equity Share Capital "
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