A brief introduction on International Accounting Standard (IAS - 16) named as Property, Plant and Equipment, within the introduction disclosure requirements are described. The second part covers the application of IAS - 16 on Financial Statements of Pakistan Cables

1. Application of International Accounting Standard (IAS-16) on Pakistan Cables
Contents
Introduction............................................................................................................................................................................... 2
Definition:................................................................................................................................................................................... 2
Elements of Property, Plant & Equipment ............................................................................................................... 2
Measuring Cost / Initial Recognition............................................................................................................................... 3
Subsequent Measurement ................................................................................................................................................... 3
Methods of Measurement after Recognition................................................................................................................ 3
Cost Model............................................................................................................................................................................. 4
Depreciation..................................................................................................................................................................... 4
Revaluation Method........................................................................................................................................................... 4
Steps for Revaluation ................................................................................................................................................... 5
Accounting Entries........................................................................................................................................................ 5
Retirement and Disposal...................................................................................................................................................... 6
Disclosures................................................................................................................................................................................. 6
Application of International Accounting Standard - 16 on Pakistan Cables................................................... 7
Introduction of Pakistan Cables.................................................................................................................................... 7
Cost / Revaluation.............................................................................................................................................................. 8
Depreciation ......................................................................................................................................................................... 9
Initial Recognition............................................................................................................................................................10
Measurement......................................................................................................................................................................10
Conclusion................................................................................................................................................................................11

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Introduction
First of all we will define Property, Plant and Equipment according to the International
Accounting Standard.
Definition:
Property, plant and equipment are the tangible assets that
 Are held by an organization for the use in production or supply of goods or services
for rental to others, or for administrative purposes.
 Are expected to be used during more than one period.
Elements of Property, Plant & Equipment
 Carrying Amount
The Book value of asset by deducting all the accumulated depreciation.
 Cost
The Purchase price of asset at the time of acquisition.
 Depreciable Amount
The Systematic allocation of depreciable amount of an asset over its useful life.
 Fair Value
The amount for which an asset can be exchange between two parties at arm length.
 Impairment Loss
The Book value is less than a recoverable amount.
 Recoverable Amount
The Value which realizable in the market and value of asset in use.

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 Residual Value
The amount which can be received at the end of an asset life by selling it also known
as Scrap value.
 Useful Life
In IAS 16 it refers with the availability of an asset to the organization.
Measuring Cost / Initial Recognition
Property, Plant and equipment should be recognized as an asset when
 The Probability of future economic benefits will flow to the business
 The cost of the asset can be measured reliably
 The asset should initially be measured at its cost
 Its purchase price
 Any direct / attributable cost which brings the asset in operational position
 Any cost which is related with disseminating and removing the asset from one site
to other for restoring which has to be occurred in any case
Subsequent Measurement
Subsequent expenditure should be capitalized when
 The expenditure increases the life of an assets.
 Replaces any component of an asset and the carrying amount of the component
replaced is derecognized.
Methods of Measurement after Recognition
There are two models which is given by the IAS 16 (Property, Plant and Equipment)
1) Cost Model
2) Revaluation Model

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Cost Model
Cost model gives the direction to measure the asset at which it is recognized in the books of
accounts.
Depreciation
Depreciation means the allocation of depreciable amount over the useful life of an
asset.
The effects of depreciation in financial statements
i. Income Statement
ii. Balance Sheet (Less from asset)
However while studying the IAS 16 we have to remember that the land will not be
depreciated because the land has infinite life well other fixed assets are to be
depreciated because they have a finite life.
It the residual value is greater than the carrying value, then the depreciation will not
be charged.
Formula
Cost – Residual value
Useful life of an asset
Below are the reasons on which we have to revise the depreciation amount;
 Changes in Depreciation Method
 Changes in Useful life of an asset
 Change in the residual value
Revaluation Method
Revaluation model allow the treatment of assets to be shown at their revalued amount less
accumulated depreciation.
Fair value of assets is usually the market value if an asset is revalued, any accumulated
depreciation at the date of the revaluation should be written off to the revaluation reserve.

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Steps for Revaluation
There are some steps which must be followed for revaluation, the steps for
revaluation are given in sequence below
1. Restate asset cost to the revalued amount
2. Remove accumulated depreciation provision
3. Transfer the increase to cost amount and the depreciation provision to the
revaluation reserves
4. Recalculate current years depreciation on the revalued amount if applicable
Accounting Entries
When Revaluation surplus is happened
1. Increase in asset value
Asset A/c
Revaluation reserve A/c
2. When asset is sale or disposed off
Revaluation reserve A/c
Retained earnings A/c
Any amount remaining in the revaluation reserve account
3. When revaluation deficit happened
Revaluation reserve A/c
Asset A/c
If any revaluation account has been maintain for the same asset. If not it will be
taken account for the impairment losses.

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Retirement and Disposal
Any property, plant and equipment item should be eliminated from the financial when it
has been disposed off.
Gain / Loss will be calculated in the following manner;
Gain / Loss = Amount Received – Book value
Any Gain / Loss realized on asset disposal will be charged to income statement.
Disclosures
IAS 16 requires the following disclosure requirement for each class of property, plant and
equipment.
 Measurement bases i.e. Cost or revaluation
 Depreciation Method
 Useful life
 Depreciation rate
 Carrying value (Beginning / Ending)
 Accumulated depreciation balance ( Beginning / Ending)
 Revaluation
o Basis of valuation
o Date of valuation
o Whether an independent value was used
o Carrying value if not revaluation had taken place
o Revaluation surplus
 Additions in assets
 Disposals
 Impairment losses

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Application of International Accounting Standard - 16 on Pakistan Cables
Introduction of Pakistan Cables
Pakistan Cables, the country's oldest and most reputable cable manufacturer, was
established over 5 decades ago in 1953 under the sponsorship of BICC, UK and the Chinoy
family. In the subsequent five decades, Pakistan Cables has earned a reputation as a market
leader in the industry and a company that does not compromise on quality. Consequently,
the company has gained a position as being the premier cable manufacturer in the country.
Pakistan Cables has been listed on the Karachi Stock Exchange since 1955. In 2010 General
Cable Corporation, a Fortune 500 company and global leader in cable manufacturing
invested in Pakistan Cables by taking up a 25% equity stake in the company. Pakistan
Cables' manufacturing facilities and head office are located in Karachi on an 11.5 acre site.
This site also houses a 2MW co-generation power plant, which allows the company to be
self-reliant for its electricity needs. Pakistan Cables presently employs over 400 people. It
has regional office in Lahore and branch offices in Rawalpindi, Multan, Abbottabad,
Peshawar and Quetta. The company's distribution network covers more than 55 cities and
towns all over Pakistan. Pakistan Cables is engaged in the manufacture of wires, cables and
conductors in both copper and aluminum. In addition, Pakistan Cables also produces
aluminum sections for architectural applications under the brand name of Alum-Ex. The
company has two other product lines, namely PVC Compound and Copper Rod. Given its
focus on quality, Pakistan Cables continuously reviews and improves the effectiveness of its
Quality Management System in line with objectives of achieving higher productivity,
uncompromising quality and maximum customer satisfaction. Pakistan Cables was the first
cable manufacturer and amongst the first 5 companies in Pakistan to be ISO 9001 certified.
It has recently updated its certification to the ISO 9001:2008 version.
Pakistan Cables Limited is the country’s oldest cables manufacturer engaged in
manufacturing of wires and cables and other engineering products.
The Company was established in 1953 in collaboration with BICC, United Kingdom.
The Company manufactures General Wiring Cables in the range of 250/750 volts. These
cables manufactured in conformity with national and international standards that provides

8. Application of International Accounting Standard (IAS-16) on Pakistan Cables
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safety and saving in electricity consumption because of the use of pure copper and cable
grade PVC (Plastic Compound Vanile).
The Company provides overhead conductors to the utility companies WAPDA and KESC
which are manufactured from EC grade Aluminum Rod and Copper Rod.
PCL also manufactures telephone, intercom, coaxial cables and various types of special
cables which include air field lighting, control cables, etc.
Alum-Ex is the brand name under which Pakistan Cables manufactures aluminum sections
for the construction and architectural industry.
PCL has also set up a plant to manufacture High Conductivity Oxygen Free 8mm Copper
Rod.
In 2010 / 11, Pakistan Cables had a total turnover of USD 46 million. The Company has
been a regular winner of the Karachi Stock Exchange’s Top 25 Companies Award, most
recently winning the award in 2004, 2006 & 2007. Pakistan Cables has also been
recognized as a winner of the Brands of the Year Award in 2007 & 2008. Protecting the
health and safety of our people and ensuring a healthy working environment is also of
great importance to Pakistan Cables. The Company is committed to working towards
designing a workplace that minimizes work related risks and occupational health and
safety. Pakistan Cables also lays great stress on environment protection. Plant operations
are strictly controlled to maintain safe environment for workers, as well as the surrounding
community. Several measures have been taken to control pollution and to maintain a clean,
green and healthy environment. Pakistan Cables has also achieved in January 2011
certification for its HSE Management Systems conforming to ISO 14001:2004 EMS and
OHSAS 18001:2007.
Cost / Revaluation
Opening
Balance
Addition Revaluation (Disposal) Closing
Leasehold land 590,950 78,050 669,000
Building 265,260 41,084 306,344
Leasehold 19,043 19,043

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improvements
Plant & machinery 1,321,649 53,655 1,375,304
Office Equipment &
appliance
67,170 9,717 -1,015 75,872
Furniture & fitting 17,332 5,397 22,729
Vehicle 38,703 13,128 -2,171 49,660
Loose tools 1,327 20 1,347
Total 2,302,391 100,960 119,134 -3,186 2,519,299
Depreciation
Opening
Balance
For the
year
(Adjustment/
Disposal)
As at
Closing
Net Book
Value
Rate
Leasehold land 669,000
Building 26,526 13,263 -39,789 306,399 5
Leasehold
improvements
190 190 18,863 12
Plant & machinery 794,030 102,650 896,680 478,624 -81,225
Office Equipment &
appliance
54,665 6,297 -980 60,082 15,790 -1,225,833
Furniture & fitting 10,185 1,683 11,868 10,861 -8,812
Vehicle 16,548 7,005 -1,693 21,860 27,800 20
Loose tools 1,272 30 1,302 45 33
Total 903,226 131,118 -42,462 991,982 1,527,382 -1,315,800
Depreciation has been allocated
Cost of sales 120,407
Selling Cost 4,140
Administrative
Expenses
6,671
131,218
 Leasehold land assets the Pakistan Cable Co. have adopted the revaluation model

10. Application of International Accounting Standard (IAS-16) on Pakistan Cables
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Balance at End 669,000
(-) Balance at Start 590,950
Revaluation 78,050
The revaluation surplus is transferred to the retained earnings. The land is revalued
at regular basis.
 The Building has also been revalued and the revaluation surplus
Balance at End 306,344
(-) Balance at Start 265,260
Revaluation
Surplus
41,084
Initial Recognition
All the other assets are recognized on cost
 Leasehold improvement
 Plant & Machinery
 Office equipment
 Furniture & Fittings
 Vehicle
 Loose Tools
Measurement
Depreciation on the entire asset is calculated on the basis of straight line the
accounting entry of depreciation transferring to accumulated depreciation.
Depreciation A/c 131,218

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Accumulated depreciation A/c 131,218
Conclusion
According to our findings the calculations given in Financial Statements of Pakistan Cables
have been applied according to IAS-16 requirement and all other details relating to IAS-16
which have not been given in the Financial Statements are not examined.