IAS 16 (International Accounting Standard No. 16) focuses on the accounting treatment of property, plant and equipment. Its objective is to enable users of financial statements to understand an entity’s investment in these assets and related changes.
IAS 16 provides guidance on how to properly evaluate and account for property, plant and equipment assets in a company’s financial statements.
Paragraph 29 of IAS 16 states that an entity should choose either the cost model (paragraph 30) or the revaluation model (paragraph 31) as its accounting policy and apply that policy to all items comprising a class of property, plant and equipment.
In the revaluation model, the standard states that “an item of property, plant and equipment whose fair value can be measured reliably shall be carried at its revalued amount, which is its fair value at the time of revaluation, less accumulated depreciation and the amount of any impairment losses”.
Additionally, in paragraph 32 the standard states that “the fair value of land and buildings shall be determined on the basis of market-based evidence through an appraisal, usually performed by professionally qualified appraisers.”
