Final answer:
Under IFRS, PPE is measured and recorded at historical cost less accumulated depreciation. Other methods like fair value, replacement cost, and net realizable value are not used for initial measurement but may be relevant for subsequent reporting.
Step-by-step explanation:
Under IFRS (International Financial Reporting Standards), PPE (Property, Plant, and Equipment) is measured and recorded at its historical cost less accumulated depreciation, or sometimes referred to as the cost model. This means that the initial cost of acquiring the PPE is recorded, and then the accumulated depreciation over time is deducted to reflect the decrease in the asset's value.
Other methods, such as fair value, replacement cost, or net realizable value, are not used for the initial measurement and recording of PPE under IFRS, but they may be relevant for subsequent reporting, impairment, or disposal.
For example, if a company purchased a building for $1,000,000, and over 10 years, $200,000 of depreciation expense was recorded, the carrying amount of the building (PPE) on the balance sheet would be $800,000 ($1,000,000 - $200,000).