Property, plant and equipment include the assets that are expected to be used in operations for more than a year. Assets classified as property, plant and equipment are tangible assets that have physical substance. Property, plant and equipment include tangible assets that have physical substance, such as land, buildings, machinery, equipment, vehicles, furniture and fixtures. Because these assets are expected to be used over multiple accounting periods, they are called as long-lived assets. Property, plant and equipment are recorded at the acquisition cost when they are initially recorded. In subsequent periods, accumulated depreciation is subtracted from the acquisition cost to report the carrying amount of the asset, except for land. Land is not depreciated and the acquisition cost of land is reported as carrying amount in the financial statements. All property, plant and equipment other than land are depreciated over the useful life of the asset. Depreciation is the process of allocating the cost of property, plant and equipment over the life of the asset. Depreciation expense is reported in the income statement. Accumulated depreciation is a contra-asset asset account that is subtracted from property, plant and equipment in the statement of financial position. If the fair value of property, plant and equipment is lower than the carrying amount, the asset is impaired and an impairment loss is recognized. Acquisition Cost Acquisition cost includes all the expenditures required to make an asset ready for the intended use are included in the acquisition cost of the asset. Cost of demolishing an old building on land purchased is included in the acquisition cost of land. Depreciation Except for land, the cost of property, plant and equipment is allocated over the life of the asset through depreciation process. The cumulative amount of depreciation is recorded in the accumulated depreciation account. Carrying Amount (Book Value) Carrying amount, also called as book value, of an asset is calculated by subt
