• IAS 16, Property, Plant and Equipment

History

• Issued November 1998.
• Effective date: Annual financial periods beginning on or after 1 July 1999.
• Superseded by and incorporated into IAS 16 (Revised 2003) effective: Annual periods beginning on or after 1 January 2005.

SIC 14 addresses how an enterprise should account for impairments or losses of items of property, plant and equipment, the related compensation from third parties, and the subsequent restoration, purchase or construction of assets.

SIC 14 confirms that three separate economic events are involved and that each event should be accounted for separately. The three separate events are:

• the impairment or loss,
• the related compensation from third parties, and
• the subsequent restoration, purchase or construction of assets.

Therefore, if a fixed asset is impaired or lost, any claim for compensation from a third party or any subsequent cost of repair or acquisition of a replacement asset are separate economic events and should be accounted for separately. Impairments should be recognised under IAS 36. Monetary or non-monetary compensation from third parties (insurance companies, governments, or lawsuits) should be included in the income statement when it probable and measurable. Compensation that is contingent on the occurrence of some future event, such as winning a lawsuit, must be virtually certain before it can be recognised. The cost of a replacement asset would normally be capitalised. Restoration cost would be capitalised only if increases the performance capability of the asset.