SSAP 17
STATEMENT OF STANDARD ACCOUNTING PRACTICE 17
PROPERTY, PLANT AND EQUIPMENT
(Issued July 1995; revid April 2001 in bold type)
The standards, which have been t in bold italic type, should be read in the context of the background material and implementation guidance and in the context of the Foreword to Statements of Standard Accounting Practice ,Interpretationsand Accounting Guidelines. Accounting standardsStatements of Standard Accounting Practiceare not intended to apply to immaterial items (e paragraph 8 of the Foreword).
Introduction
The objective of this Statement is to prescribe the accounting treatment for property, plant and equipment. The principal issues in accounting for property, plant and equipment are the timing of recognition of the asts, the determination of their carrying amounts and the depreciation charges to be recognid in relation to them , and the determination and accounting treatment of other impairment
s to the carrying amounts .
Scope
1.This Statement should be applied in accounting for property, plant and equipment except
when another Statement of Standard Accounting Practice requires or permits a different
accounting treatment.
2.Charitable, government subvented and not-for-profit organisations who long-term
financial objective is other than to achieve operating profits (eg. trade associations, clubs
and retirement schemes) are exempted from compliance with this Statement provided that
full disclosure of their accounting policies is made. Nonetheless, the enterpris are
encouraged to follow the accounting practices t out in this Statement.
3. This Statement superdes SSAP 6 "Depreciation accounting". While this Statement is not
primarily intended to apply to asts other than property, plant and equipment, many of the
principles contained in this Statement may also be appropriate for other depreciable asts.
does not apply to:
Statement
4. This
a. forests and similar regenerative natural resources; and
b. mineral rights, the exploration for and extraction of minerals, oil, natural gas and similar
non-regenerative resources.
However, this Statement does apply to property, plant and equipment ud to develop or
maintain the activities or asts covered in a. or b. but parable from tho activities or asts.
5. In some circumstances other Statements of Standard Accounting Practice permit the initial
recognition of the carrying amount of property, plant and equipment to be determined using an approach different from that prescribed in this Statement. For example, SSAP 7 "Group
accounts" SSAP 30 "Business combinations" requires property, plant and equipment acquired in a business combination to be measured initially at fair value even when it exceeds cost.
However in such cas all other aspects of the accounting treatment for the asts, including depreciation, are determined by the requirements of this Statement.
Definitions
6.The following terms are ud in this Statement with the meanings specified:
"Property, plant and equipment" are tangible asts that:
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a.are held by an enterpri for u in the production or supply of goods or rvices, for
rental to others, or for administrative purpos; and
b.are expected to be ud during more than one period.
"Depreciation" is the systematic allocation of the depreciable amount of an ast over its
estimated uful life.
"Depreciable amount" is the cost of an ast, or other amount substituted for cost in the
financial statements, less its estimated residual value.
本人鉴定"Uful life" is either:
a.the period of time over which an ast is expected to be ud by the enterpri; or
b.the number of production or similar units expected to be obtained from the asts by
the enterpri.
"Cost" is the amount of cash or cash equivalents paid or the fair value of the other
consideration given to acquire an ast at the time of its acquisition or construction.
"Residual value" is the net amount which the enterpri expects to obtain for an ast at the end of its uful life after deducting the expected costs of disposal.
"Fair value" is the amount for which an ast could be exchanged between knowledgable, willing parties in an arm's length transaction.
An "impairment loss" is the amount by which the carrying amount of an ast exceeds its
recoverable amount.
"Carrying amount" is the amount at which an ast is included recognid in the balance
sheet after deducting any accumulated depreciation and accumulated impairment loss
thereon.
"Recoverable amount" is the amount which the enterpri expects to recover from the
future u of an ast, including its residual value on disposal. "Recoverable amount" is the higher of an ast's net lling price and value in u.
Recognition of property, plant and equipment
7.An item of property, plant and equipment should be recognid as an ast when:
a.it is probable that future economic benefits associated with the ast will flow to the
enterpri; and
b.the cost of the ast to the enterpri can be measured reliably.
8. Property, plant and equipment is often a major portion of the total asts of an enterpri, and
therefore is significant in the prentation of its financial position. Furthermore, the
determination of whether an expenditure reprents an ast or an expen can have a
significant effect on an enterpri's reported results of operations.
9. In determining whether an item satisfies the first criterion for recognition, an enterpri needs
to asss the degree of certainty attaching to the flow of future economic benefits on the basis of the available evidence at the time of initial recognition. Existence of sufficient certainty that the future economic benefits will flow to the enterpri necessitates an assurance that the
enterpri will receive the rewards attaching to the ast and will undertake the associated
risks. This assurance is usually only available when the risks and rewards have pasd to the
enterpri.
10. The cond criterion for recognition is usually readily satisfied becau the exchange悔过自新的检讨书
transaction evidencing the purcha of the ast identifies its cost. In the ca of a lf-
constructed ast, a reliable measurement of the cost can be made from the transactions with
parties external to the enterpri for the acquisition of the materials, labour and other inputs
ud during the construction process.
11. Land and buildings in the cour of development or redevelopment should be treated as
follows:
a. Held for re-sale
Where land and buildings in the cour of development or redevelopment are held for re-
sale, they should be regarded as trading stocksinventories of an enterpri and as such,
should be accounted for in accordance with SSAP 3 "Stocks and work in
progress".SSAP 22 "Inventories".
b. Held for other purpos
Where land and buildings in the cour of development or redevelopment are held for
production, rental or administrative purpos or where no decision has yet been taken to
re-ll the land and buildings, they should be included in the financial statements as
property, provided that the recognition criteria in paragraph 7 are satisfied.
12. In identifying what constitutes a parate item of property, plant and equipment, judgement is
required in applying the criteria in the definition to specific circumstances or specific types of enterpris. It may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies, and to apply the criteria to the aggregate value. Most spare parts and rvicing
equipment are usually carried as stocks inventory and recognid as an expen as consumed.
However, major spare parts and stand-by equipment qualify as property, plant and equipment when the enterpri expects to u them during more than one period. Similarly, if the spare
parts and rvicing equipment can be ud only in connection with an item of property, plant
and equipment and their u is expected to be irregular, they are accounted for as property,
plant and equipment and are depreciated over a time period not exceeding the uful life of the related ast.
13. In certain circumstances, it is appropriate to allocate the total expenditure on an ast to its
component parts and account for each component parately. This is the ca when the
component asts have different uful lives or provide benefits to the enterpri in a different pattern thus necessitating u of different depreciation rates and methods. For example,
leahold land and buildings acquired together need to be treated as parate depreciable asts if they have different uful lives.
14. Property, plant and equipment may be acquired for safety or environmental reasons. The
acquisition of such property, plant and equipment, while not directly increasing the future
economic benefits of any particular existing item of property, plant and equipment may be
necessary in order for the enterpri to obtain the future economic benefits from its other
asts. When this is the ca, such acquisitions of property, plant and equipment qualify for
recognition as asts, in that they enable future economic benefits from related asts to be
derived by the enterpri in excess of what it could derive if they had not been acquired.
However, such asts are only recognid to the extent that the resulting carrying amount of
不吃早饭的坏处such an ast and related asts does not exceed the total recoverable amount of that ast and its related asts. For example, a chemical manufacturer may have to install certain new
chemical handling process in order to comply with environmental requirements on the
production and storage of dangerous chemicals; related plant enhancements are recognid as an ast to the extent they are recoverable becau, without them, the enterpri is unable to
manufacture and ll chemicals.
Initial measurement of property, plant and equipment
15.An item of property, plant and equipment which qualifies for recognition as an ast should
initially be measured at its cost.
Components of cost
16. The cost of an item of property, plant and equipment compris its purcha price, including
import duties and non-refundable purcha taxes, and any directly attributable costs of bringing the ast to working condition for its intended u; any trade discounts and rebates are
deducted in arriving at the purcha price. Examples of directly attributable costs are:
a. the cost of site preparation;
抢劫者b. initial delivery and handling costs;
c. installation costs; and
d. professional fees such as for lawyers, architects and engineers; and
e. the estimated cost of dismantling and removing the ast and restoring the site, to the
extent that it is recognid as a provision under SSAP 28 "Provisions, contingent
liabilities and contingent asts".
17. When payment for an item of property, plant and equipment is deferred beyond normal credit
terms, its cost is the cash price equivalent; the difference between this amount and the total
payments is recognid as interest expen over the period of credit unless it is capitalid in
accordance with guidance on borrowing costsSSAP 19 "Borrowing costs".
18. Administration and other general overhead costs are not a component of the cost of property,
plant and equipment unless they can be directly attributed to the acquisition of the ast or
bringing the ast to its working condition. Similarly, start-up and similar pre-production costs do not form part of the cost of an ast unless they are necessary to bring the ast to its
working condition.
19. The cost of a lf-constructed ast is determined using the same principles as for an acquired
ast. If an enterpri makes similar asts for sale in the normal cour of business, the cost of the ast is usually the same as the cost of producing the asts for sale (e SSAP 22花溪湖
"Inventories") , and hence includes an appropriate proportion of production overheads.
Therefore, any internal profits are eliminated in arriving at such costs. Similarly, the cost of
abnormal amounts of wasted material, labour, or other resources incurred in the production of a lf-constructed ast is not included in the cost of the ast. SSAP 19 "Borrowing costs"
按制度办事establishes criteria which, when satisfied, will result in borrowing costs being capitalid as a component of property, plant and equipment. Guidance on determining whether or not
borrowing costs might be included as a component of the cost of lf- constructed asts can be found in Accounting Guideline 2.205 "Capitalisation of borrowing costs".
20. The cost of an ast held by a le under a finance lea is determined using the principles t
out in SSAP 14 "Accounting for leas and hire purcha contracts". SSAP 14 "Leas".
Exchanges of asts
21. An item of property, plant and equipment may be acquired in exchange or part exchange for a
dissimilar item of property, plant and equipment or other ast. The cost of such an item is
measured at the fair value of the ast received, which is equivalent to the fair value of the
ast given up adjusted by the amount of any cash or cash equivalents transferred. Such an
exchange of asts is regarded as a transaction which generates gain or loss.
22. An item of property, plant and equipment may be acquired in exchange for a similar ast that
has a similar u in the same line of business and which has a similar fair value. An item of
property, plant and equipment may also be sold in exchange for an equity interest in a similar ast. In both cas, since the earnings process is incomplete, no gain or loss is recognid on
the transaction. Instead, the cost of the new ast is the carrying amount of the ast given up.
However, the fair value of the ast received may provide evidence of an impairment in the
ast given up. Under the circumstances the ast given up is written down and this written
down value assigned to the new ast. Examples of exchanges of similar asts include the
exchange of aircraft, hotels, rvice stations and other real estate properties. If other asts such as cash are included as part of the exchange transaction this may indicate that the items
exchanged do not have a similar value.
Transfers between different types of asts
23. An enterpri may, becau of a change in u or intended u, transfer an ast between
property, plant and equipment and other class of asts, such as stocks or investment
properties. The cost of such an ast on transfer is deemed to be the carrying amount of the
ast as stated under its original classification. Any previous revaluation rerve on the ast
should be frozen upon the transfer until the retirement or disposal of the ast. On the
retirement or disposal of the ast, the frozen revaluation rerve is transferred directly to
retained earnings and not throught the profit and loss account.
Subquent expenditure
2324.Subquent expenditure relating to an item of property, plant and equipment that has already been recognid should be added to the carrying amount of the ast when it is
probable that future economic benefits, in excess of the originally assd standard of
performance of the existing ast, will flow to the enterpri. All other subquent
expenditure should be recognid as an expen in the period in which it is incurred. 2425. Subquent expenditure on property, plant and equipment is only recognid as an ast when the expenditure improves the condition of the ast beyond its originally assd standard of
performance. Examples of improvements which result in incread future economic benefits
include:
a. modification of an item of plant to extend its uful life, including an increa in its
capacity;
b. upgrading machine parts to achieve a substantial improvement in the quality of output;
and
c. adoption of new production process enabling a substantial reduction in previously
assd operating costs.
2526. Expenditure on repairs or maintenance of property, plant and equipment is made to restore or
maintain the future economic benefits that an enterpri can expect from the originally
assd standard of performance of the ast. As such, it is usually recognid as an expen when incurred. For example, the cost of rvicing or overhauling plant and equipment is
usually an expen since it restores, rather than increas, the originally assd standard of
performance.
2627. The appropriate accounting treatment for expenditure incurred subquent to the acquisition of an item of property, plant and equipment depends on the circumstances which were taken into account on the initial measurement and recognition of the related item of property, plant and
equipment and whether the subquent expenditure is recoverable. For instance, when the吴刚主演的电视剧
carrying amount of the item of property, plant and equipment already takes into account a loss in economic benefits, the subquent expenditure to restore the future economic benefits
expected from the ast is capitalid provided that the carrying amount does not exceed the
recoverable amount of the ast. This is also the ca when the purcha price of an ast
already reflects the enterpri's obligation to incur expenditure in the future which is necessary to bring the ast to its working condition. An example of this might be the acquisition of a
building requiring renovation. In such circumstances, the subquent expenditure is added to
the carrying amount of the ast to the extent that it can be recovered from future u of the
ast.
2728. Major components of some items of property, plant and equipment may require replacement at regular intervals. For example, a furnace may require relining after a specified number of hours of usage or aircraft interiors such as ats and galleys may require replacement veral times
during the life of the airframe. The components are accounted for as parate asts becau
they have uful lives different from tho of the items of property, plant and equipment to
which they relate. Therefore, provided the recognition criteria in paragraph 7 are satisfied, the expenditure incurred in replacing or renewing the component is accounted for as the
acquisition of a parate ast and the replaced ast is written off.
28. An enterpri that purchas an item of property, plant and equipment may need to perform
major inspections or overhauls of the ast at regular intervals over its uful life to allow the
continued u of the ast by the enterpri. An example of this is the purcha of a vesl
which requires an overhaul, say, once every five years.
29. The cost of a major inspection or overhaul of an item of property, plant and equipment
occurring at regular intervals over the uful life of an ast and made to allow the continued
u of the ast is recognid as an expen in the period in which it is incurred except when:
a. consistent with paragraph 13, the enterpri has identified as a parate component of the
ast an amount reprenting a major inspection or overhaul and has already depreciated
that component to reflect the consumption of benefits which are replaced or restored by
the subquent major inspection or overhaul (whether the ast is carried at historical
cost or revalued);
b. it is probable that future economic benefits associated with the ast will flow to the
enterpri; and
c. the cost of the major inspection or overhaul to the enterpri can be measured reliably.
If the criteria are met, the cost is capitalid and accounted for as a component of the ast
(e Appendix).
