Final answer:
IAS 16 defines PPE as Property, Plant, and Equipment, guiding companies on the recognition, measurement, and reporting of fixed assets. It ensures accurate and consistent asset reporting, determining the carrying amount, depreciation, and impairment.
Step-by-step explanation:
IAS 16 refers to PPE as Property, Plant, and Equipment.
This standard regulates the accounting treatment of property, plant, and equipment including the recognition of assets, determination of their carrying amounts, and the depreciation charges and impairment losses to be recognized in relation to them. The standard is important for ensuring that companies report their assets accurately and consistently.
Under IAS 16, an asset is recognized when it is probable that future economic benefits associated with the asset will flow to the enterprise, and the cost of the asset can be measured reliably. This principle helps accountants determine when an item should be recorded as a fixed asset. The standard also gives guidance on how to measure the carrying amount of PPE, which includes its original cost and any subsequent costs that add to or replace part of the asset, as well as any reductions from depreciation or impairment losses.