Chapter 9: Disclosures

A table is required that explains the movements in cost, or revalued amount and depreciation, for each class of property, plant, and equipment.

Details of the nature and amount of a change in accounting estimate that has an effect in the current period, or is expected to have an effect in future periods, should be disclosed per IAS 8. Changes in accounting estimates include changes in useful lives, residual values, and depreciation methods.

There are additional disclosure requirements for property, plant, and equipment carried at a revalued amount. These include a requirement to disclose the carrying amounts of each class of property, plant, and equipment that would have been determined under the cost model. Such costs also include borrowing costs that would have been capitalized.

There are additional specific disclosure requirements for capitalized borrowing costs.

Users of financial statements might also find additional disclosures relevant to their needs. These disclosures are encouraged but not required by the standard.

General In respect of each class of property, plant and equipment, an entity is required to disclose: the measurement bases (i.e., cost or valuation) used for determining the gross carrying amount; the depreciation methods used; the useful lives or the depreciation rates used; and the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period. An entity is also required to provide a reconciliation of the carrying amount at the beginning and end of the period, in respect of each class of property, plant and equipment, showing: additions; assets classified as held for sale, or included as a disposal group classified as held for sale in accordance with IFRS 5, and other disposals; acquisitions through business combinations; increases or decreases resulting from revaluations and from impairment losses recognized or reversed in other comprehensive income; impairment losses recognized in profit or loss during the period; impairment losses reversed in profit or loss during the period; depreciation; the net exchange differences arising on the translation of the financial statements from the functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity; and other changes. The financial statements are also required to disclose: the existence and amounts of restrictions on title, and property, plant and equipment pledged as security for liabilities; the amount of expenditures recognized in the carrying amount of an item of property, plant and equipment in the course of its construction; and the amount of contractual commitments for the acquisition of property, plant and equipment.

Items stated at revalued amounts

In respect of items of property, plant, and equipment stated at revalued amounts, the entity is required to disclose:

• the effective date of the revaluation;
• whether an independent valuer was involved; and
• the revaluation surplus, indicating the movement for the period and any restrictions on the distribution of the balance to shareholders.

Inclusion of borrowing costs when disclosing the cost-based carrying amount of property, plant and equipment – example Entity K owns a self-constructed manufacturing plant which is measured at fair value under IAS 16’s revaluation model. As permitted by IAS 23, Entity K did not capitalize borrowing costs during the period of construction of the plant. Under IAS 16, Entity K is required to disclose for each revalued class of property, plant and equipment the carrying amount that would have been recognized had the assets been carried under IAS 16’s cost model. If Entity K had carried the manufacturing plant at cost during the period of construction, and application of the requirements of IAS 23 would have resulted in borrowing costs being capitalized during that period, then the amount disclosed under IAS 16 should include the effect of those borrowing costs (i.e., the gross amount that would have been capitalized less the effect of subsequent depreciation). This view has been confirmed by the IFRS Interpretations Committee (see May 2014 IFRIC Update).

Additional recommended disclosures

IAS 16 also encourages, but does not require, disclosure of the following information:

• the carrying amount of temporarily idle property, plant, and equipment;
• the gross carrying amount of any fully depreciated property, plant, and equipment that is still in use;
• the carrying amount of property, plant, and equipment retired from active use and not classified as held for sale by IFRS 5; and
• when the cost model is used, the fair value of property, plant, and equipment is materially different from the carrying amount.

Disclosure of idle assets and construction in progress The IFRIC (now called the IFRS Interpretations Committee) was asked to consider to what extent disclosures are required for property, plant and equipment that is temporarily idle and for assets under construction when additional construction has been postponed. Although the item was not taken onto the IFRIC agenda, the Committee did note that IAS 16 requires an entity to disclose the amount of expenditures recognized in the carrying amount of an item of property, plant and equipment in the course of its construction. IAS 16 encourages an entity to disclose the amount of property, plant and equipment that is temporarily idle. IAS 1 requires an entity to provide in the notes to the financial statements information that is not presented elsewhere in the financial statements but is relevant to an understanding of any of the financial statements. The IFRIC concluded that, in combination, the requirements of IAS 16 and IAS 1 lead to an expectation that, when the amount of idle assets or postponed construction projects becomes significant, such amounts will be separately disclosed. The conclusions above were set out in the May 2009 edition of IFRIC Update.