Ppsas 17 - Ppe Oct-18 2013

Philippine Public Sector Accounting Standards 17 PROPERTY, PLANT AND EQUIPMENT

Table of Contents

PAG Number BACKGROUND INTRODUCTION TO THE IPSAS 17 PHILIPPINE APPLICATION GUIDANCE TO IPSAS 17 Scope

1

Measurement after Recognition

2

Depreciation

3

Depreciation Method

4

Estimated Useful Life

5

Residual Value

6

Effective Date

7

PPSAS 17 - Property, Plant and Equipment January 2014

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Philippine Public Sector Accounting Standards 17 PROPERTY, PLANT AND EQUIPMENT

Background This Philippine Public Sector Accounting Standard (PPSAS) 17 consists of International Public Sector Accounting Standard (IPSAS) 17, “Property, Plant and Equipment”, and the Philippine Application Guidance (PAG) prepared to suit the Philippine public sector situation. The IPSAS 17 was issued in December 2001 and revised in December 2006 by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC). This includes amendments resulting from IPSASs issued up to January 15, 2012. The PAG (in italics) provides supplementary guidance on the proper implementation of IPSAS 17. Introduction to the IPSAS 17 IPSAS 17 prescribes the standards on the recognition, measurement at recognition, measurement after recognition, depreciation, impairment, derecognition and disclosure requirements dealing with transactions and events affecting property, plant and equipment of the Philippine public sector. Property, Plant and Equipment are tangible assets that are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and are expected to be used during more than one reporting period. Philippine Application Guidance to IPSAS 17 Scope PAG1.Paragraph 3 deals with the applicability of this Standard to all public sector entities other than Government Business Enterprises (GBEs). GBE is an entity that has all the following characteristics: (a) Is an entity with the power to contract in its own name; (b) Has PPSAS 17 - Property, Plant and Equipment January 2014

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been assigned the financial and operational authority to carry on a business; (c) Sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery; (d) Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm’s length); and (e) Is controlled by a public sector entity. This standard shall be applied to all National Government Agencies (NGAs), Local Government Units (LGUs) and Government-Owned and/or Controlled Corporations (GOCCs) not considered as GBEs. Measurement after Recognition PAG2. Paragraph 42 provides that an entity shall choose either the cost model or the revaluation model as its accounting policy, and shall apply that policy to an entire class of property, plant, and equipment. For consistency and uniformity, the cost model shall be adopted for all classes of PPE. Depreciation PAG3.

Paragraphs 59 to 78 deal with the recognition of depreciation, methods of depreciation, determination of depreciable amount, residual value and useful life of PPE. For uniform accounting treatment for the depreciation of PPE the following modifications shall be made: Initial Recognition of Depreciation Depreciation of an asset begins when it is available for use such as when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. For simplicity and to avoid proportionate computation, depreciation shall be for one month if the PPE is available for use on or before the 15th of the month. However, if the PPE is available for use after the 15th of the month, depreciation shall be for the succeeding month.

Depreciation Method PAG4.The straight line method of depreciation shall be adopted unless another method is more appropriate for agency operation. PPSAS 17 - Property, Plant and Equipment January 2014

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Estimated Useful Life PAG5. The estimation of the useful life of the asset is a matter of judgment based on the experience of the agency with similar assets. However, the agency shall use the Schedule on the Estimated Useful Life of PPE by classification prepared by COA. Residual Value PAG6. A residual value equivalent to at least five percent (5%) of the cost shall be adopted unless a more appropriate percentage is determined by the agency based on their operation. Effective Date PAG7.This PPSAS shall apply for annual financial statements covering periods beginning January 1, 2014.

PPSAS 17 - Property, Plant and Equipment January 2014

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