Cost model for property, plant and equipment
After recognising an asset initially, apply the selected IAS 16 policy consistently to an entire class of property, plant and equipment. Under the cost model the asset is not periodically revalued to fair value; its carrying amount still changes as depreciation and impairment are recognised. The cost model is different from the revaluation model, and other standards can apply their own cost-based requirements.
Worked example
A machine costs $100,000 and has accumulated depreciation of $30,000 and an impairment loss of $5,000. Its cost-model carrying amount is $65,000.
Common mistake
Saying the carrying amount remains at original cost despite depreciation and impairment, or mixing cost and revaluation models for assets in the same class without justification.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |