Understanding Property, Plant, and Equipment: Ind AS 16 vs. Ind AS 40 for Asset Classification.

Property, Plant, and Equipment (PPE) are tangible assets used for production, rental (excluding land and buildings), or administrative purposes, expected to be utilized over multiple periods. A bearer plant, like a banana tree, is used for producing agricultural goods and is unlikely to be sold as produce. PPE costs are recognized as assets if future economic benefits are probable and costs are measurable. Land and buildings for production or administrative use are treated as PPE under Ind AS 16, while those for rental or capital appreciation follow Ind AS 40. Spare parts and equipment are classified as PPE if they meet the criteria; otherwise, they are inventory.

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