IAS 16 - PPE transfer to Inventory
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IAS 16 - PPE transfer to Inventory
If a PPE (lets say Plant Machinery) is now being transferred to Inventory, due to change is nature of use, how will it be done? Will it be transferred to Inventory at Carrying value of the asset or any other amount?
Re: IAS 16 - PPE transfer to Inventory
lower of cost and net realisable amount.
Re: IAS 16 - PPE transfer to Inventory
cost being NBV at transfer date
Re: IAS 16 - PPE transfer to Inventory
Could you clarify what is meant by 'change in nature of use'? Classifying it as inventory may not be accurate. It could be more appropriate to consider it as an asset held for sale as per IFRS 5, or as an investment property in line with IAS 40.
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Re: IAS 16 - PPE transfer to Inventory
Yes, i can give example. Lets say entity sells windmills. So it uses iron rods for construction of windmill towers. And such rods form part of inventory.
Now, it had created one windmill for captive use, which is shown as PPE in the Financials.
However after couple years, they no longer need it. So they dismantled the windmill and now the iron rods can be used while making towers for normal customers. So they want to shift these iron rods from PPE to Inventory. This is the nature of transaction.
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Re: IAS 16 - PPE transfer to Inventory
I see, so some scrap parts are being repurposed. This isn't covered by IFRS, and I'd suggest estimating the proportion of these rods in the total carrying amount of PP&E, and then reclassifying this amount to inventory.
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Re: IAS 16 - PPE transfer to Inventory
Okay, I understand.
Thank a lot Marek !!
Thank a lot Marek !!