Understanding the Recognition Criteria for an Exchange of PPE Under Ind AS 16
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- Last Updated on 24 April, 2024
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Para 24 of Ind AS 16, Property, Plant and Equipment, states that one or more items of property, plant and equipment may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The cost of such an item of property, plant and equipment 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 measurable.
The acquired item is measured in this way even if an entity cannot immediately de-recognise the asset given up. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up.
The principal issue this part of the Ind AS deals with is the recognition of the assets in case of the exchange of assets. This story discusses a case study on how to determine the recognition value of the asset under Ind AS 16 where an exchange of PPE has taken place.
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