Page 1 of 1

IAS 16

Posted: 21 Oct 2020, 20:17
by yvreddy
Hi,

Advance paid for purchase of machinery and no work has commenced yet. Can it be treated as advances under current assets or to be shown as capital work in progress under PPE.

Please advice as per IFRS

Re: IAS 16

Posted: 21 Oct 2020, 21:09
by JRSB
From memory the standard isn't clear and you can treat it as a prepayment or other suitable approach. Presumably you don't control the machinery yet though.

Re: IAS 16

Posted: 21 Oct 2020, 21:45
by Marek Muc
it's true that IAS 16 does not specifically cover prepayments, but in my opinion it doesn't have to. Prepayment should not be treated as PP&E as you did not receive any physical asset yet. In other words, a prepayment does not meet the definition of PP&E:
Property, plant and equipment are tangible items that [...]
Prepayment is an intangible right to receive a tangible asset in the future

PS. we had a discussion on this topic before:
viewtopic.php?f=4&t=363

Re: IAS 16

Posted: 21 Oct 2020, 21:54
by JRSB
Ah yes , that must be the memory :lol:

Re: IAS 16

Posted: 22 Oct 2020, 06:38
by yvreddy
Thanks