PROPERTY, PLANT AND EQUIPMENT (PPE)

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					PROPERTY, PLANT AND
EQUIPMENT
(PPE)
STRUCTURE

 Recognition of an asset
 Changes

 Classification of property, plant and equipment

 Depreciation
RECOGNITION AS AN ASSET


•It is probable that the future economic benefits or
  service potential associated with the item will
  flow to the entity

•Cost or Fair Value of the items can be measured
 reliably
      CHANGES
      SOME PRINCIPAL DIFFERENCES BETWEEN UNSAS AND IPSAS
United Nations System Accounting                            IPSAS
        Standards (UNSAS)

•   PPE is not capitalized and not         •   PPE is capitalized and depreciated
    subject to depreciation (PPE               over useful live (commitments for
    expensed when purchase order “PO”          acquisition of PPE (POs) disclosed in
    is issued);                                the Notes);
•   Entities disclose the total value of   •   Costs related to “Self constructed
    PPE at original acquisition cost in        assets” should be tracked and
    the Notes;                                 capitalized if asset recognition
•   Most “self constructed assets” are         criteria is met;
    not tracked;                           •   Major overhauls (substantial
•   Major overhauls (substantial               improvements) to assets are
    improvements) to assets are                capitalized;
    expensed as incurred;                  •   Impairment losses are recognised in
•   Impairment losses are not                  the period they occur;
    recognised when they occur (since
    PPE items are expensed on
    purchase)
CLASSES OF UN PROPERTY, PLANT AND
EQUIPMENT
  A Class of property, plant and equipment is a grouping of assets of a
        similar nature or function in an entity’s operations that is shown
        as a single item for the purpose of disclosure in the Notes to the
        financial statements.

                            Property, Plant and Equipment



Vehicles    Communication and           Furniture &         Leasehold             Buildings          Land
              IT Equipment               Fixtures         Improvements



                                 Surveillance/Control
                                     Equipment
                                                              Telecommunication
                                                                  Equipment
                                                                                     …        Category
                                                                                                 n




           Asset    Asset       Asset      …      Asset
            1         2           3                 n
INTANGIBLE ASSETS
Two main characteristics
   Lack physical existence
   Are not financial instruments



                            Intangible asset: ”an
Some Examples               identifiable non-monetary asset
                            without asset without physical
     Patents               substance”
     Software
     Copyright             Conditions:
                               •Must be identifiable
     Franchises/licenses      •Will provide future
     Trademarks               economic benefits
                               •Benefits are controlled
CHANGES IN ACCOUNTING AND REPORTING
POLICIES
INITIAL ADOPTION
      Decisions on accounting and reporting policies
            Determining capitalisation threshold and policies on asset groupings
            Setting policies on expensing or capitalising subsequent expenditure
            Developing impairment policies
            Identifying useful lives within approved ranges for all types of PPE
            Deciding useful lives of asset components (e.g. plumbing and heating
               system of a building)
            Identifying situations of control over shared assets
            Determining if further classes are needed for disclosure and respective
               lives
            Deciding how to measure beginning balances (cost or fair value)


                 An entity that adopts accrual accounting for the first time in
                 accordance with IPSAS shall initially recognise PPE at:

                                                                     Fair value
          Cost
                                           …or…
DEPRECIATION
       Depreciation is the systematic allocation of the depreciable amount of an
       asset over its useful life. All Items of PPE, except land, have limited useful
       lives. Because of this limited useful life, the costs of these assets must be
       distributed as expenses over the years they benefit.



   Value           Initial Cost
                                                                     UN System wide
                                                                     Recommended
                                                                     Accounting Practice is
                                                                     to use years as the
                                  Depreciation                       measurement
                                                                     parameter for
                                  Decline in service potential       depreciation.




                                                                            Time
                                    Useful life
         Acquisition                                              Disposal
         Initial cost                                             Residual value

Depreciation is the result of an allocation, not a valuation
process. The term is used to describe the gradual conversion of the costs of
the asset into an expense.
PPE & INTANGIBLE ASSETS




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