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• AASB 116 applies to all companies and other entities that must prepare and lodge Corporations Act financial reports and to general-purpose financial reports in both the for-profit and not-for profit sectors.
 

• It does not apply to:
• property, plant and equipment held for sale (under AASB 5)
 

• biological assets related to agricultural activity (see AASB 141)
 

• exploration assets (see AASB 6)
 

• mineral rights and reserves
• It does apply to property being constructed or developed for future use as investment property.

• Items of property, plant, and equipment must be recognised as assets only when:
• it is probable that the future economic benefits associated with the asset will flow to the entity, and
 

• the cost of the item can be measured reliably.
• Subsequent costs, such as repairs and maintenance, are generally expensed, however the cost of a regular major inspection or replacement of a component (eg. for an aircraft) is recognised in the carrying amount of the asset when incurred if the recognition criteria above are satisfied. The carrying amount of the part that is replaced is derecognised in accordance with the derecognition requirements of AASB 116.

• Initial recognition of items of property, plant and equipment is at cost, which is the amount of cash or cash equivalents paid or fair value of other consideration given or any other amount attributed by the specific requirements of an Australian Accounting Standard.
 

• In the case of not-for-profit entities cost is measured as fair value at the date of acquisition where items of property, plant and equipment are acquired for no or nominal consideration.
 

• The elements of cost for an item of property, plant and equipment are:
• purchase price including import duties and non-refundable taxes
 

• costs directly attributable to getting the item ready for use such as installation costs
 

• an initial estimate of dismantling and removing the item and restoration costs.

• An entity must select the ‘cost model’ or the ‘revaluation model’ for the subsequent measurement of each class of property, plant and equipment.
 

• The cost model requires that the carrying amount of each item of property, plant and equipment in the class be determined as cost less any accumulated depreciation and any accumulated impairment losses
 

• The revaluation model requires that the carrying amount of each item of property, plant and equipment in the class be determined at its revalued amount, which is fair value at revaluation date less any subsequent accumulated depreciation and any subsequent accumulated impairment losses.
• Revaluations under the revaluation model must be done regularly and all individual items within a given class must be revalued (eg. all buildings).
 

• Revaluation increases are credited directly to a revaluation reserve and revaluation decreases are recognised in the profit or loss except where they represent a reversal of prior revaluation for the same item.
 

• In the case of not-for-profit entities revaluations are performed on a class basis rather than item-by-item with the net revaluation increment or decrement for the class brought to account.
• Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
 

• The depreciable amount of an asset must be allocated systematically over the asset’s useful life and this includes any item of property, plant and equipment that has been revalued which has a limited useful life.
• The depreciation method used must reflect the pattern of expected benefit consumption and be reviewed at least annually.
 

• The residual value must be reviewed at least annually.
 

• Components of an asset with differing patterns of benefits must be depreciated separately.
• To determine whether an item of property, plant and equipment is impaired, AASB 136 Impairment of Assets is applied,
 

• Compensation received from third parties for items of property, plant and equipment that were impaired, lost or given up is included in profit or loss when it becomes receivable.

• The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal.
 

• The gain or loss arising from the derecognition is recognised in profit or loss. The gain is prohibited from being classified as revenue (ie it is classified as income).

• For each class of property, plant and equipment:
• Measurement bases used for determining the gross carrying amounts
 

• Depreciation methods and depreciation rates or useful lives
 

• Gross carrying amount and accumulated deprecation at start and end of period
 

• A reconciliation of the carrying amount at start and end of the period
 

• Other disclosures include:
• Information about items pledged as security for liabilities
 

• Information about the revaluations obtained.