Under IPSAS 45, an item of property, plant, and equipment is measured after recognition using one of two models: the historical cost model (cost less accumulated depreciation and accumulated impairment losses) or the current value model (a revalued amount). The Standard applies to annual periods beginning on or after January 1, 2025.

What Is the Objective of IPSAS 45?

The Standard states that "the objective of this Standard is to prescribe the accounting treatment for property, plant, and equipment so that users of financial statements can discern information about an entity's investment in its property, plant, and equipment and the changes in such investment."

Who Must Apply the Standard?

The Standard states that "an entity that prepares and presents financial statements under the accrual basis of accounting shall apply this Standard in accounting for property, plant, and equipment, except when another Standard requires or permits a different accounting treatment." This makes IPSAS 45 the general standard for this asset class, unless a specific standard (such as for investment property) provides otherwise.

When Is an Item of Property, Plant, and Equipment Recognized?

The Standard sets out two conditions that must both be met, stating that "an item of property, plant, and equipment shall be recognized if, and only if: (a) It is probable that future economic benefits or service potential associated with the item will flow to the entity; and (b) The item can be measured reliably."

How Do the Standard Define Depreciation and Useful Life?

The Standard defines depreciation as "the systematic allocation of the depreciable amount of an asset over its useful life." Useful life is defined as "(a) The period over which an asset is expected to be available for use by an entity; or (b) The number of production or similar units expected to be obtained from the asset by an entity." Based on these two concepts, the annual depreciation charge is calculated and deducted from the asset's cost or its revalued amount, depending on the model applied.

How Is the Item Measured After Recognition?

The Standard allows two subsequent measurement models. The first is the historical cost model, under which "after recognition, an item of property, plant, and equipment shall be carried at its historical cost, less any accumulated depreciation and any accumulated impairment losses." The second is the current value model, under which "after recognition, an item or part of an item of property, plant, and equipment whose current value can be measured reliably shall be carried at a revalued amount, being its current operational value or fair value at the date of the revaluation, less any subsequent accumulated depreciation, and subsequent accumulated impairment losses."

When Does IPSAS 45 Become Mandatory?

The Standard states that "an entity shall apply this Standard for annual financial statements covering periods beginning on or after January 1, 2025. Earlier application is permitted for entities that apply IPSAS 43, IPSAS 44, and IPSAS 46 at or before the date of initial application of the Standard." The former IPSAS 17 itself confirms that "International Public Sector Accounting Standard (IPSAS) 17, Property, Plant, and Equipment has been superseded by IPSAS 45, Property, Plant, and Equipment."

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