AS 10

The main objective of AS 10 is to prescribe the accounting treatment for properties, plant, and equipment. It enables the users to understand the accounting treatment for investments made by an entity. The issues discussed in this Accounting standard are the recognition of assets, depreciation charges, and impairment of assets.

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AS 10

Accounting Standard (AS) 10 Property, Plant & Equipment applies in the accounting of property, plant, and equipment except in cases when another accounting standard requires a different accounting treatment.

AS 10 do not apply in the following cases

  1. Biological assets related to agricultural activities excluding produce on bearer plants.
  2. Wasting assets including mineral rights, expenditure on exploration and extraction of mineral oil, natural gas and similar non-regenerative resources.

Agriculture produce is the harvested product of biological assets of an entity.

Bearer plant is a plant which is used in the production and supply of agriculture produce. Following are not bearer plants: –

  1. Plants cultivated to be harvested as agriculture produce.
  2. Annual crops like wheat, maize etc

Biological assets are living animals or plants.

Cost of an asset should be recognized only if it is probable that the future economic related to such asset will flow to the enterprise and its cost can be measured reliably.

Cost of an item of property, plant, and equipment comprises of its purchase price including the import duties and non-refundable taxes after deducting discounts and rebates.

Also, it comprises of costs incurred in bringing the asset to the location and the cost incurred in making such asset capable of operating.

Understand the Methods of Depreciation here in detail.

Some Important terms in AS 10

The fair value of an asset is the amount at which we can exchange such an asset between the willing parties in an arm’s length transaction.

An impairment loss is an amount at which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of its net selling price and its value in use.

Property plant and equipment are tangible assets. These assets help in the production or supply of goods and services.

The residual value of an asset is the estimated amount that will be received at its disposal at the end of its useful life.

The depreciable amount is the cost of an asset reduced by its residual value. Every significant item of property, plant, and equipment should be depreciated separately. For Example – it may be appropriate to depreciate the airframe and engines of such aircraft to depreciate separately.

Recognize the depreciation charge for each period in the statement of profit and loss. Allocate the depreciable amount of an asset on a systematic basis over the useful life of such an asset.

Also, review the useful life of an asset and its residual value at least at the end of each financial year.

AS 10


Class of property, plant, and equipment is the grouping of assets of a similar nature.

Some of the separate classes are as below

  1. Land
  2. Land & building
  3. Machinery
  4. Ships
  5. Aircrafts
  6. Motor vehicles
  7. Furniture and fixtures
  8. Office equipment
  9. Bearer plants

There are different types of depreciation methods which an entity can adopt for charging depreciation on an asset like straight-line method, diminishing balance method, units of production method.

We shall derecognize the carrying amount of an item of property, plant, and equipment in the following cases: –

  1. On disposal of an asset
  2. When no more future economic benefits are expected from the use of such asset or disposal of the asset.

Transfer the gain or loss arising due to de-recognition of such item of property, plant, and equipment to the statement of profit and loss on its de-recognition.

Financial statements of an entity shall disclose the following

  1. Measurement basis used in determining the carrying amount
  2. Depreciation methods used
  3. Useful lives of assets and depreciation rates.
  4. Accumulated depreciation at the beginning and end of the financial period
  5. Changes in the method of depreciation
  6. Additions
  7. Assets retired from use
  8. Assets disposed
  9. Impairment loss

Financial statement shall also disclose the following

  1. Contractual commitments for the acquisition of property, plant, and equipment.
  2. Amount of expenditure recognized in the carrying amount of property, plant, and equipment.
  3. Amount of assets held for disposal

On the revaluation of property, plant, and equipment disclose the following: –

  1. The effective date of revaluation
  2. Whether an independent valuer was involved
  3. Method and assumptions applied
  4. Revaluation surplus

Solved Example for You

State the factors to consider while determining the useful life of an asset.

Answer: – Useful life of an asset is the expected utility of an asset to the entity. The factors which should be considered while determining the useful life of an asset are as follows: –

  1. Expected usage of an asset.
  2. Expected capacity or output.
  3. It’s expected physical wear and tear.
  4. Expected technical and commercial obsolescence due to change in the market demand, improvement in production etc.
  5. Legal or similar limits on the use of an asset. For Example Expiry of the lease agreement.
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