IND AS 10

1. Accounting Standard-10
Property, Plant and Equipment

2. Introduction
AS 10 Property, Plant and Equipment prescribe the accounting treatment for properties, P&E
(Plant and Equipment) so that the users of financial statements could recognize and appreciate the
information about the investment made by any enterprise in property, P&E and the also
understand the changes made in such investments.
It is also important to note that AS 6 – Accounting for Depreciation stands withdrawn and such
matters related to depreciation is included in AS 10.

3. Applicability of AS 10 Property, Plant and Equipment
AS 10 is to be applied in accounting for property, P&E (Plant and Equipment) and this standard
are not applicable to:
(a) biological assets which are related to agricultural activities except for bearer plants. The
Standard is applicable to bearer plants, however, it doesn’t apply to the produce on bearer plants;
and
(b) wasting assets which include mineral rights, expenses related to exploration for and extraction
of oil, minerals, natural gas and other non-regenerative resources.

4. Recognition of Asset under AS 10 Property, Plant and Equipment
The cost of property and P&E should be recognized as an asset only if: (i) it is apparent that
the future economic benefits related to such asset would flow to the business; and (ii) the
cost of such asset could be reliably measured.

5. Measurement of cost of the asset
An enterprise can select the revaluation model or the cost model as the accounting policy and
employ the same to the entire class of its properties and P&E. According to the cost model, after
recognizing the asset as an item of property or plant and equipment, it should be carried at the
cost less the accumulated depreciation and the accumulated impairment losses (if any). As per
revaluation model, once the asset is recognized and its fair value could be measured reliably, then
it must be carried at the revalued amount, which is the fair value of such asset at the date of the
revaluation as reduced any following accumulated depreciation and accumulated impairment
losses (if any). Revaluations must be done at regular intervals for ensuring that the carrying
amount doesn’t differ much from that which would be determined using the fair value at balance
sheet date.

6. Depreciation under AS 10 Property, Plant and Equipment
As per the standard, depreciation charge for every period must be recognized in the P/L Statement
unless it’s included in carrying the amount of any another asset. Depreciable amount of any asset
should be allocated on a methodical basis over the useful life of the asset.
Every part of property or P&E (Plant and Equipment) whose cost is substantial with respect to the
overall cost of the item must be depreciated separately.

7. The standard also prescribes, that the residual value and useful life of an asset must be reviewed
at the end of each financial year and, in case the expectations vary from the previous estimates,
changes must be accounted for as changes in accounting estimate as per Accounting Standard 5 –
Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
The method of depreciation employed must reflect the pattern of future economic benefits of the
asset consumed by an enterprise. Various depreciation methods could be used for allocating the
depreciable amount of an asset on a methodical basis over the useful life of the asset. The
methods include SLM (Straight-line Method), diminishing balance method or units of production
method.

9. Q.No.1: Provisions contained in the Accounting Standard in respect of Revaluation of fixed assets.
ANSWER (i) Revaluation of fixed Assets According to Accounting Standard 10 on “Accounting for Fixed Assets”
(a) When fixed assets are revalued in financial statements, the basis of selection should be an entire class of assets or
the selection should be done on a systematic basis. The basis of selection should be disclosed.
(b) The revaluation of any class of assets should not result in the net book value of that class being greater than the
recoverable amount of that class of assets.
(c) The accumulated depreciation should not be credited to profit and loss account.
(d) The net increase in book value should be credited to a revaluation reserve account.
(e) On disposal of a previously revalued item of fixed asset, the difference between net disposal proceeds and the
net book value should be charged or credited to the profit and loss account except that to the extent to which
such a loss is related to an increase and which has not been subsequently reversed or utilized may be charged
directly to that account.

10. Q.No.2: Valuation of fixed assets in special cases.
ANSWER
Para 15 of Accounting Standard 10 on “Accounting for Fixed Assets” states the following provisions regarding
valuation of fixed assets in special cases :
1. In the case of fixed assets acquired on hire purchase terms, although legal ownership does not vest in the
enterprise, such assets are recorded at their cash value, which if not readily available, is calculated by assuming an
appropriate rate of interest. They are shown in the balance sheet with an appropriate narration to indicate that the
enterprise does not have full ownership thereof.
2. Where an enterprise owns fixed assets jointly with others (otherwise than as a partner in a firm), the extent of its
share in such assets, and the proportion in the original cost, accumulated depreciation and written down value are
stated in the balance sheet. Alternatively, the pro rata cost of such jointly owned assets is grouped together with
similar fully owned assets. Details of such jointly owned assets are indicated separately in the fixed assets register. 3.
Where several assets are purchased for a consolidated price, the consideration is apportioned to the various assets on
a fair basis as determined by competent valuers