Differences Between Accounting Treatment Of Pp & E Under Us Gaap And Ifrs

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Differences in Accounting Treatment of PP&E under US GAAP and IFRS 1. Carrying Basis US GAAP generally uses historical cost for initial measurement. Statement of Federal Financial Accounting Standards (SFFAS) Paragraph 26 states that all general PP&E should be recorded at cost. Cost shall include all costs incurred to bring the PP&E a form and location suitable for its intended use. Examples of the cost of PP&E may include: • amounts paid to vendors; • transportation charges to the point of initial use; • handling and storage costs; • labor and other direct or indirect production costs (for assets produced or constructed); • acquisition and preparation costs of buildings and other facilities; • material amounts of interest costs paid According to IFRS, an item of PP&E should initially be recorded at cost (IAS 16.15). Similarly to US GAAP, cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original acquiring price but also costs of site preparation, handling and delivery, installation, related professional fees, and the estimated cost of dismantling and removing the asset and restoring the site (IAS 16.17). Both standards measure initial cost similarly, but they treat revaluation of PP&E in different ways. Under GAAP, any upward adjustments to initial cost due to change of circumstances are prohibited. PP&E is measured at fair value only when fair value s lower than the original cost,

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