Philippine Public Sector Accounting Standards 17

PROPERTY, PLANT AND EQUIPMENT

Table of Contents

PAG
Number
BACKGROUND
INTRODUCTION TO THE IPSAS 17
PHILIPPINE APPLICATION GUIDANCE TO IPSAS 17
Scope

Measurement after Recognition

Depreciation

Depreciation Method

Estimated Useful Life

Residual Value

Effective Date

PPSAS 17 - Property, Plant and Equipment

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Philippine Public Sector Accounting Standards 17

PROPERTY, PLANT AND EQUIPMENT

Background
This Philippine Public Sector Accounting Standard (PPSAS) 17
consists of International Public Sector Accounting Standard (IPSAS)
17, Property, Plant and Equipment, and the Philippine Application
Guidance (PAG) prepared to suit the Philippine public sector
situation.
The IPSAS 17 was issued in December 2001 and revised in
December 2006 by the International Public Sector Accounting
Standards Board (IPSASB) of the International Federation of
Accountants (IFAC). This includes amendments resulting from IPSASs
issued up to January 15, 2012.
The PAG (in italics) provides supplementary guidance on the proper
implementation of IPSAS 17.
Introduction to the IPSAS 17
IPSAS 17 prescribes the standards on the recognition, measurement
at recognition, measurement after recognition, depreciation,
impairment, derecognition and disclosure requirements dealing with
transactions and events affecting property, plant and equipment of
the Philippine public sector.
Property, Plant and Equipment are tangible assets that are held for
use in the production or supply of goods or services, for rental to
others or for administrative purposes and are expected to be used
during more than one reporting period.
Philippine Application Guidance to IPSAS 17
Scope
PAG1.Paragraph 3 deals with the applicability of this Standard to all
public sector entities other than Government Business
Enterprises (GBEs).
GBE is an entity that has all the following characteristics: (a) Is
an entity with the power to contract in its own name; (b) Has
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been assigned the financial and operational authority to carry

on a business; (c) Sells goods and services, in the normal
course of its business, to other entities at a profit or full cost
recovery; (d) Is not reliant on continuing government funding
to be a going concern (other than purchases of outputs at
arms length); and (e) Is controlled by a public sector entity.
This standard shall be applied to all National Government
Agencies (NGAs), Local Government Units (LGUs) and
Government-Owned and/or Controlled Corporations (GOCCs)
not considered as GBEs.
Measurement after Recognition
PAG2. Paragraph 42 provides that an entity shall choose either the
cost model or the revaluation model as its accounting policy,
and shall apply that policy to an entire class of property,
plant, and equipment.
For consistency and uniformity, the cost model shall be
adopted for all classes of PPE.
Depreciation
PAG3.

Paragraphs 59 to 78 deal with the recognition of

depreciation, methods of depreciation, determination of
depreciable amount, residual value and useful life of PPE.
For uniform accounting treatment for the depreciation of PPE
the following modifications shall be made:
Initial Recognition of Depreciation
Depreciation of an asset begins when it is available for use
such as when it is in the location and condition necessary for
it to be capable of operating in the manner intended by
management.
For simplicity and to avoid proportionate computation,
depreciation shall be for one month if the PPE is available for
use on or before the 15th of the month. However, if the PPE
is available for use after the 15th of the month, depreciation
shall be for the succeeding month.

Depreciation Method
PAG4.The straight line method of depreciation shall be adopted
unless another method is more appropriate for agency
operation.
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Estimated Useful Life

PAG5. The estimation of the useful life of the asset is a matter of
judgment based on the experience of the agency with similar
assets.
However, the agency shall use the Schedule on the
Estimated Useful Life of PPE by classification prepared by
COA.
Residual Value
PAG6. A residual value equivalent to at least five percent (5%) of
the cost shall be adopted unless a more appropriate
percentage is determined by the agency based on their
operation.
Effective Date
PAG7.This PPSAS shall apply for annual financial statements
covering periods beginning January 1, 2014.

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