Disclosure of tangible non-current asset

This chapter explains how tangible non-current assets are disclosed in financial statements under IAS 16. It also looks at why businesses maintain a non-current asset register, and how that register supports internal control.

Learning objectives

By the end of this chapter, you should be able to:

• Illustrate how tangible non-current asset balances and movements are disclosed in financial statements.
• Explain the purpose and function of a non-current asset register.

Disclosures

IAS 16 requires detailed disclosures for property, plant, and equipment (PPE). These disclosures matter because PPE is often a large part of total assets. Investors, lenders, and other users need enough detail to understand:

• how much the business has invested in productive capacity,
• how those assets are measured (cost or revaluation), and
• how depreciation and impairment affect profit and the statement of financial position.

Key requirement areas are highlighted below.

Class-specific disclosures

• Measurement basis: cost or revalued amount
• Depreciation methods, useful lives, and rates
• Gross carrying amount and accumulated depreciation/impairment losses

Reconciliation of carrying amounts

A detailed reconciliation showing movements during the period, including:

• additions and disposals
• revaluation increases and decreases
• the depreciation charge
• impairment losses

Revaluation disclosures

• Effective date of the revaluation
• Whether an independent valuer was involved
• The carrying amount that each revalued class would have had under the cost model
• The revaluation surplus, recognised through other comprehensive income, and its movement for the period

Additional information

• Restrictions on asset titles or assets pledged as security
• Contractual commitments for future acquisitions
• Compensation received for impaired or lost assets

IAS 16 also relies on materiality and judgement. The goal is to present information clearly without hiding important details in overly broad totals.

In practice, disclosures are usually presented in the notes, with assets grouped into classes (for example, land, buildings, and machinery) when those classes are material. Immaterial classes may be combined, while material classes should be shown separately. Directors apply this judgement when preparing the financial statements.

Exam tip: A revaluation gain is taken to the revaluation surplus through other comprehensive income, not profit or loss. When a revalued asset is later sold, the disposal gain or loss is measured against its revalued carrying amount, not its original cost.

Similar disclosure notes apply to other balances too - the next chapter, Intangible non-current asset and amortisation, shows the equivalent note for intangible assets.

Illustrative disclosure format

	Land & buildings	Plant & machinery	Total
Cost or valuation
At start of year	xxx	xxx	xxx
Additions	xxx	xxx	xxx
Revaluation	xxx	xxx	xxx
Disposals	(xxx)	(xxx)	(xxx)
At end of year	xxx	xxx	xxx
Accumulated depreciation
At start of year	xxx	xxx	xxx
Charge for the year	xxx	xxx	xxx
Eliminated on revaluation	(xxx)	(xxx)	(xxx)
Eliminated on disposal	(xxx)	(xxx)	(xxx)
At end of year	xxx	xxx	xxx
Carrying amount
At start of year	xxx	xxx	xxx
At end of year	xxx	xxx	xxx

Illustration: PPE schedule

JB Ltd purchased a factory plant for $100,000 on 1 January 20X0. The company depreciates its assets using the straight-line method at 10% per annum.

Additional information:

• Accumulated depreciation at 31 December 20X4: $50,000
• Additions on 1 January 20X5: $50,000
• Disposals on 1 January 20X5 (before depreciation): $30,000
• Depreciation charge for year ended 31 December 20X5: $12,000

Required: Present the financial statement disclosure note for the non-current asset.

Suggested solution:

Financial statement disclosure note (factory plant)

	Factory plant ($)
Cost
At 1 January 20X5	100,000
Additions	50,000
Disposals	(30,000)
At 31 December 20X5	120,000
Accumulated depreciation
At 1 January 20X5	50,000
Eliminated on disposal	(15,000)
Charge for the year	12,000
At 31 December 20X5	47,000
Carrying amount
At 1 January 20X5	50,000
At 31 December 20X5	73,000

This illustrates a single-class asset disclosure note for non-current assets in the financial statements.

To see why the numbers work, follow the movements step by step:

• Opening position

  • The asset originally cost $100,000 on 1 January 20X0.
  • By 31 December 20X4, accumulated depreciation is $50,000, which matches 5 years × 10% × $100,000.

• Disposal on 1 January 20X5

  • The disposed items had an original cost of $30,000.
  • Because the disposal happens before any 20X5 depreciation is charged, the accumulated depreciation on the disposed items relates only to earlier years.
  • At 10% straight line, accumulated depreciation on the disposed items by the end of 20X4 is $15,000 (five full years × 10% × $30,000).
  • In the note, you remove both:
    • the cost of the disposed assets ($30,000), and
    • the related accumulated depreciation ($15,000).

• Additions and depreciation for 20X5

  • Additions of $50,000 increase the cost base.
  • The depreciation charge for 20X5 is 10% × closing cost of $120,000 = $12,000. The additions on 1 January get a full year’s charge, and the items disposed of on 1 January get none.

After reflecting additions, disposals (cost and accumulated depreciation), and the year’s depreciation charge, the closing carrying amount is $73,000.

The note ties to the main statements. The closing carrying amount of $73,000 is the PPE figure in the statement of financial position. The $12,000 depreciation charge, and any gain or loss on disposal, go to profit or loss. When an asset is revalued, the uplift is added to cost or valuation, the accumulated depreciation to that date is eliminated, and the surplus goes through OCI to the revaluation surplus in equity.

Non-current asset register

A non-current asset register is a detailed record of all non-current assets. It is used to:

1. track and manage non-current assets within an organisation
2. serve as part of the internal control system, ensuring accurate accounting and safeguarding of assets

The register typically includes asset descriptions, purchase dates, cost, location, depreciation rates, and carrying values. In practice, it may also include serial numbers or unique asset identification codes, the department or cost centre responsible for the asset, details of disposals or write-offs, and insurance information. This level of detail makes the register a management tool as well as an accounting record.

Its primary functions include:

• Asset tracking: Monitoring location and status to prevent loss or misuse
• Depreciation management: Supporting accurate depreciation calculations for reporting and tax purposes
• Financial reporting: Providing reliable data for financial statements and audits
• Maintenance scheduling: Assisting in planning maintenance to extend asset life and reduce downtime

The register is periodically reconciled with the general ledger to confirm that the detailed asset records agree with the accounting records. This reconciliation is an important internal control procedure.

If differences arise between the register and the general ledger, they may indicate:

• recording errors,
• unrecorded disposals, or
• misappropriation of assets (in more serious cases).

Regular physical verification of assets against the register strengthens this control, especially for portable or high-value items that are more susceptible to loss or theft.