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AS 10: Property, Plant and Equipment

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 10: Property, Plant and Equipment: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

PPE is recognised when future economic benefits are probable and cost can be measured reliably, then depreciated systematically over useful life with ongoing review and derecognition.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Capex purchases and project expenditure
02Repairs versus capital expenditure
03Component accounting and major inspections
04CWIP, depreciation, impairment and disposal

3. Practical application workflow

  1. Confirm recognition criteria and asset readiness.
  2. Build cost from directly attributable components.
  3. Separate material components with different useful lives.
  4. Begin depreciation when available for intended use.
  5. Review useful life, residual value, impairment and derecognition.

4. Real-world application example

A production line includes a furnace lining replaced every three years while the main structure lasts fifteen years. The lining is a separate component, depreciated over three years and derecognised when replaced.

5. Journal-entry and accounting record pattern

CapitalisationDr PPE / Cr Bank, payable or CWIP.
DepreciationDr Depreciation expense / Cr Accumulated depreciation.
DisposalDr Bank/receivable and accumulated depreciation; Cr PPE cost; balance to gain/loss.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Approved capex request with asset category and owner.
  • CWIP ageing and ready-for-use certification.
  • Asset tagging and physical verification.
  • Component and useful-life review.
  • Disposal approval and register update.

Common errors and red flags

  • Capitalising routine repairs.
  • Leaving completed assets in CWIP.
  • Using tax rates without accounting analysis.
  • Not derecognising replaced components.
  • Depreciating from invoice date instead of ready-for-use date.

7. Reviewer questions

  1. Does the expenditure create or enhance a controlled asset?
  2. Which costs are directly attributable?
  3. Are material components separately identified?
  4. When was the asset ready for intended use?
  5. Do register, ledger and physical assets reconcile?

Related standards: AS 5, AS 6, AS 16, AS 28

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

Read the extended AS 10 guideBack to all standards
Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.