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Property, Plant and Equipment

Ind AS - 016 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 016 - Indian Accounting Standard (Ind AS) 16 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Objective 1 The objective of this Standard is to prescribe the accounting treatment for so that users of the financial statements can discern information abou .....

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Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. (b) biological assets related to agricultural activity other than bearer plants (See Ind AS 41, Agriculture). This Standard applies to bearer plants but it does not apply to the produce on bearer plants. (c) the recognition and measurement of exploration and evaluation assets (see Ind AS 106, Exploration for and Evaluation of Mineral Resources). (d) mineral rights and mineral reserves such as oil, natural gas and similar .....

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depreciation, are prescribed by this Standard. 5 An entity accounting for investment property in accordance with Ind AS 40, Investment Property, shall use the cost model in this Standard. Definitions 6 The following terms are used in this Standard with the meanings specified: A bearer plant is a living plant that: (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural .....

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n Accounting Standards, eg Ind AS 102, Share-based Payment. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Entity-specific value is the present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability. Fair val .....

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ing more than one period. Recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Useful life is: (a) the period over which an asset is expected to be available for use by an entity; or (b) .....

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, such items are classified as inventory. 9 This Standard does not prescribe the unit of measure for recognition, ie what constitutes an item of . Thus, judgement is required in applying the recognition criteria to an entity s specific circumstances. It may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies, and to apply the criteria to the aggregate value. 10 An entity evaluates under this recognition principle all its costs at the time they are incurre .....

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ts because they enable an entity to derive future economic benefits from related assets in excess of what could be derived had those items not been acquired. For example, a chemical manufacturer may install new chemical handling processes to comply with environmental requirements for the production and storage of dangerous chemicals; related plant enhancements are recognised as an asset because without them the entity is unable to manufacture and sell chemicals. However, the resulting carrying a .....

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rpose of these expenditures is often described as for the repairs and maintenance of the item of . 13 Parts of some items of may require replacement at regular intervals. For example, a furnace may require relining after a specified number of hours of use, or aircraft interiors such as seats and galleys may require replacement several times during the life of the airframe. Items of may also be acquired to make a less frequently recurring replacement, such as replacing the interior walls of a bui .....

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e performing regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. This occurs regardless of whether the cost of the previous inspection was identified in the transaction in which t .....

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rade discounts and rebates. (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce .....

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ocation and condition (such as samples produced when testing equipment); and (f) professional fees. 18 An entity applies Ind AS 2, Inventories, to the costs of obligations for dismantling, removing and restoring the site on which an item is located that are incurred during a particular period as a consequence of having used the item to produce inventories during that period. The obligations for costs accounted for in accordance with Ind AS 2 or Ind AS 16 are recognised and measured in accordance .....

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mount of an item of ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an item are not included in the carrying amount of that item. For example, the following costs are not included in the carrying amount of an item of : (a) costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at les .....

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ng the construction or development activities. For example, income may be earned through using a building site as a car park until construction starts. Because incidental operations are not necessary to bring an item to the location and condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognised in profit or loss and included in their respective classifications of income and expense. 22 The co .....

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cost of the asset. Ind AS 23, Borrowing Costs, establishes criteria for the recognition of interest as a component of the carrying amount of a self -constructed item of . 22A Bearer plants are accounted for in the same way as self-constructed items of before they are in the location and condition necessary to be capable of operating in the manner intended by management. Consequently, references to construction in this Standard should be read as covering activities that are necessary to cultivat .....

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s of may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and nonmonetary assets. The following discussion refers simply to an exchange of one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence. The cost of such an item of is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measura .....

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on (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or (b) the entity-specific value of the portion of the entity s operations affected by the transaction changes as a result of the exchange; and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific val .....

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If an entity is able to measure reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident. 27 The cost of an item of held by a lessee under a finance lease is determined in accordance with Ind AS 17. 28 [Refer Appendix 1]. Measurement after recognition 29 An entity shall choose either the cost model in paragraph 30 or th .....

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epreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. 32 [Refer Appendix 1]. 33 [Refer Appendix 1]. 34 The frequency of revaluations depends upon the changes in fair values of the items of being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a .....

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ollowing ways: (a) the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into .....

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ions. The following are examples of separate classes: (a) land; (b) land and buildings; (c) machinery; (d) ships; (e) aircraft; (f) motor vehicles; (g) furniture and fixtures; (h) office equipment; and (i) bearer plants. 38 The items within a class of are revalued simultaneously to avoid selective revaluation of assets and the reporting of amounts in the financial statements that are a mixture of costs and values as at different dates. However, a class of assets may be revalued on a rolling basi .....

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it or loss. 40 If an asset s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus. 41 The revaluation surplus included in equity in resp .....

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aluation surplus to retained earnings are not made through profit or loss. 42 The effects of taxes on income, if any, resulting from the revaluation of are recognised and disclosed in accordance with Ind AS 12, Income Taxes. Depreciation 43 Each part of an item of with a cost that is significant in relation to the total cost of the item shall be depreciated separately. 44 An entity allocates the amount initially recognised in respect of an item of to its significant parts and depreciates separat .....

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depreciation method that are the same as the useful life and the depreciation method of another significant part of that same item. Such parts may be grouped in determining the depreciation charge. 46 To the extent that an entity depreciates separately some parts of an item of , it also depreciates separately the remainder of the item. The remainder consists of the parts of the item that are individually not significant. If an entity has varying expectations for these parts, approximation techn .....

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ecognised in profit or loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see Ind AS 2). Similarly, depreciation of used for development activities may be included in the cost of an intan .....

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, Changes in Accounting Estimates and Errors. 52 Depreciation is recognised even if the fair value of the asset exceeds its carrying amount, as long as the asset s residual value does not exceed its carrying amount. Repair and maintenance of an asset do not negate the need to depreciate it. 53 The depreciable amount of an asset is determined after deducting its residual value. In practice, the residual value of an asset is often insignificant and therefore immaterial in the calculation of the de .....

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asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. However, under usage methods of depreciation the depreciation charge can be zero while there is no production. 56 The future economi .....

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or physical output. (b) expected physical wear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used and the repair and maintenance programme, and the care and maintenance of the asset while idle. (c) technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output of the asset. Expected future reductions in the selling price of an item that was .....

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e or after consumption of a specified proportion of the future economic benefits embodied in the asset. Therefore, the useful life of an asset may be shorter than its economic life. The estimation of the useful life of the asset is a matter of judgement based on the experience of the entity with similar assets. 58 Land and buildings are separable assets and are accounted for separately, even when they are acquired together. With some exceptions, such as quarries and sites used for landfill, land .....

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nd itself may have a limited useful life, in which case it is depreciated in a manner that reflects the benefits to be derived from it. Depreciation method 60 The depreciation method used shall reflect the pattern in which the asset s future economic benefits are expected to be consumed by the entity. 61 The depreciation method applied to an asset shall be reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future .....

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constant charge over the useful life if the asset s residual value does not change. The diminishing balance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The entity selects the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expec .....

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mponent of revenue may be affected by inflation, which has no bearing upon the way in which an asset is consumed. Impairment 63 To determine whether an item of is impaired, an entity applies Ind AS 36, Impairment of Assets. That Standard explains how an entity reviews the carrying amount of its assets, how it determines the recoverable amount of an asset, and when it recognises, or reverses the recognition of, an impairment loss. 64 [Refer Appendix 1] Compensation for impairment 65 Compensation .....

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ed or disposed of is determined in accordance with this Standard; (c) compensation from third parties for items of that were impaired, lost or given up is included in determining profit or loss when it becomes receivable; and (d) the cost of items of restored, purchased or constructed as replacements is determined in accordance with this Standard. Derecognition 67 The carrying amount of an item of shall be derecognised: (a) on disposal; or (b) when no future economic benefits are expected from i .....

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eld for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.] 7[69 The disposal of an item of may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). The date of disposal of an item of is the date the recipient obtains control of that ite .....

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ty to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed. 71 The gain or loss arising from the derecognition of an item of shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 8[72 The amount of consideration to be included in the gain or loss arising from the derecognition of an item of is d .....

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s used; (c) the useful lives or the depreciation rates used; (d) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; and (e) a reconciliation of the carrying amount at the beginning and end of the period showing: (i) additions; (ii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with Ind AS 105 and other disposals; (iii) acquisitions through .....

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e functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity; and (ix) other changes. 74 The financial statements shall also disclose: (a) the existence and amounts of restrictions on title, and pledged as security for liabilities; (b) the amount of expenditures recognised in the carrying amount of an item of in the course of its construction; (c) the amount of contractual commitments for the .....

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lows them to review the policies selected by management and enables comparisons to be made with other entities. For similar reasons, it is necessary to disclose: (a) depreciation, whether recognised in profit or loss or as a part of the cost of other assets, during a period; and (b) accumulated depreciation at the end of the period. 76 In accordance with Ind AS 8 an entity discloses the nature and effect of a change in an accounting estimate that has an effect in the current period or is expecte .....

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endix 1] (d) [Refer Appendix 1] (e) for each revalued class of , the carrying amount that would have been recognised had the assets been carried under the cost model; and (f) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders. 78 In accordance with Ind AS 36 an entity discloses information on impaired in addition to the information required by paragraph 73(e)(iv)-(vi). 79 Users of financial statements may also fin .....

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* 80A * 80B * 80C * Effective Date 81 * 81A * 81B * 81C * 81D * 81E * 81F * 81G * 81H * 81I * 81J As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers, paragraphs 68A, 69, 72 are amended. An entity shall apply those amendments when it applies Ind AS 115.] Appendix A Changes in Existing Decommissioning, Restoration and Similar Liabilities This Appendix is an integral part of the Ind AS. Background 1 Many entities have obligations to dismantle, remove and restore items .....

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37 contains requirements on how to measure decommissioning, restoration and similar liabilities. This Appendix provides guidance on how to account for the effect of changes in the measurement of existing decommissioning, restoration and similar liabilities. Scope 2 This Appendix applies to changes in the measurement of any existing decommissioning, restoration or similar liability that is both: (a) recognised as part of the cost of an item of in accordance with Ind AS 16; and (b) recognised as .....

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eg cash flows) required to settle the obligation; (b) a change in the current market-based discount rate as defined in paragraph 47 of Ind AS 37 (this includes changes in the time value of money and the risks specific to the liability); and (c) an increase that reflects the passage of time (also referred to as the unwinding of the discount). Accounting Principles 4 Changes in the measurement of an existing decommissioning, restoration and similar liability that result from changes in the estimat .....

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ase in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in profit or loss. (c) if the adjustment results in an addition to the cost of an asset, the entity shall consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the entity shall test the asset for impairment by estimating its recoverable amount, and shall account for any impairment loss, in accordance with I .....

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or loss; (ii) an increase in the liability shall be recognised in profit or loss, except that it shall be recognised in other comprehensive income and reduce the revaluation surplus within equity to the extent of any credit balance existing in the revaluation surplus in respect of that asset. (b) in the event that a decrease in the liability exceeds the carrying amount that would have been recognised had the asset been carried under the cost model, the excess shall be recognised immediately in .....

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AS 1 requires disclosure in the statement of profit and loss of each component of other comprehensive income or expense. In complying with this requirement, the change in the revaluation surplus arising from a change in the liability shall be separately identified and disclosed as such. 7 The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability shall be recog .....

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n ) to gain access to mineral ore deposits. This waste removal activity is known as stripping . 2. During the development phase of the mine (before production begins), stripping costs are usually capitalised as part of the depreciable cost of building, developing and constructing the mine. Those capitalised costs are depreciated or amortised on a systematic basis, usually by using the units of production method, once production begins. 3. A mining entity may continue to remove overburden and to .....

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t have a higher ratio of ore to waste. There can therefore be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. 5. This Appendix considers when and how to account separately for these two benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently. Scope 6. This Appendix applies to wa .....

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activity is realised in the form of inventory produced, the entity shall account for the costs of that stripping overburden removal activity in accordance with the principles of Ind AS 2, Inventories. To the extent the benefit is improved access to ore, the entity shall recognise these costs as a non-current asset, say, Stripping Activity Asset, if the criteria in paragraph 9 below are met. 9. An entity shall recognise a stripping activity asset if, and only if, all of the following are met: (a) .....

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activity asset will be accounted for as part of an existing asset. 11. The stripping activity asset s classification as a tangible or intangible asset is the same as the existing asset. In other words, the nature of this existing asset will determine whether the entity shall classify the stripping activity asset as tangible or intangible. Initial measurement of the stripping activity asset 12. The entity shall initially measure the stripping activity asset at cost, this being the accumulation of .....

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y take place at the same time as the production stripping activity, but which are not necessary for the production stripping activity to continue as planned. The costs associated with these incidental operations shall not be included in the cost of the stripping activity asset. An example of such type of incidental operations would be building an access road in the area in which the stripping campaign is taking place. 13. When the costs of the stripping activity asset and the inventory produced .....

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of inventory produced compared with expected cost; (b) volume of waste extracted compared with expected volume, for a given volume of ore production; and (c) mineral content of the ore extracted compared with expected mineral content to be extracted, for a given quantity of ore produced. 13A The production measure shall not be calculated using a basis that is based on sales values. A basis that is based on sales values, in the context of stripping costs, is inappropriate because it is not closel .....

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volves practical difficulties. Identifying a future sales price for ore that will be mined in the future can be difficult, given the volatility of market prices for many minerals. Further complexities may arise when more than one mineral is present (whether byproducts or joint products) when the ore is extracted. Subsequent measurement of the stripping activity asset 14. After initial recognition, the stripping activity asset shall be carried at either its cost or its revalued amount less deprec .....

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re body that is used to depreciate or amortise the stripping activity asset will differ from the expected useful life that is used to depreciate or amortise the mine itself and the related lifeof- mine assets. The exception to this are those limited circumstances when the stripping activity provides improved access to the whole of the remaining ore body. For example, this might occur towards the end of a mine s useful life when the identified component represents the final part of the ore body t .....

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stomers.] 3 Appendix C, Determining whether an Arrangement contains a Lease contained in Ind AS 17, Leases. 4 Appendix A, Intangible Assets-Web Site Costs contained in Ind AS 38, Intangible Assets. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 16 and the corresponding International Accounting Standard (IAS) 16, , and IFRIC 1, Changes in Ex .....

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Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. 2 Different terminology is used in this standard, eg, the term balance sheet is used instead of Statement of financial position and Statement of profit and loss is used instead of Statement of comprehensive income . 3 Paragraph 28 has been deleted since Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance, does not permit the option of reducing the carrying amoun .....

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16 has been modified, since Ind AS 40, Investment Property, prohibits the use of fair value model. 6. Paragraph 12 of Appendix B has been modified and paragraph 13A of Appendix B has been added to provide guidance with regard to the requirements contained in the paragraphs 12 and 13. 10[7. Paragraphs 80 to 80C of IAS 16 which deals with the transitional provisions have not been included in Ind AS 16 as all transitional provisions related to Ind ASs, wherever considered appropriate have been inc .....

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dinary activities, routinely sells items of that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 115, Revenue from Contracts with Customers. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories. 2. Substituted vide F. No .....

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30-3-2016 before it was read as, 72 The amount of consideration to be included in the gain or loss arising from the derecognition of an item of is determined in accordance with the requirements for determining the transaction price in paragraphs 47-72 of Ind AS 115. Subsequent changes to the estimated amount of the consideration included in the gain or loss shall be accounted for in accordance with the requirements for changes in the transaction price in Ind AS 115. 4. Substituted vide F. No. 0 .....

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read as, 1[68A However, an entity that, in the course of its ordinary activities, routinely sells items of that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with Ind AS 18, Revenue. Ind AS 105 does not apply when assets that are held for sale in the ordinary course of business are transferred to inven .....

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