What is IAS 16?
IAS 16 refers to the International Accounting Standard 16, which outlines the accounting practices governing Property, Plant, and Equipment. This standard encompasses all considerations for costs, disposal, depreciation, and revaluation of any assets falling under the criteria for Property, Plant, and Equipment, excluding those covered by subsequent accounting standards for specific assets. For example, IAS 41 addresses biological assets used in agriculture and is not applicable under IAS 16.
Accounting Models Utilized in IAS 16
Cost Model
The asset is recorded at cost minus depreciation and impairment. It follows the original asset cost throughout its lifespan.
Revaluation Model
The asset is accounted for at revalued amounts. This reflects the fair value at the time of revaluation, adjusted by depreciation and impairment. The asset’s value is influenced by market factors affecting pricing.
Are these Models Supported by Oracle NetSuite?
Yes. Both Cost and Revaluation Models are integrated into the Oracle NetSuite Fixed Assets Management Module. The principles of recognition and accounting for Plant, Property, and Equipment can be effectively implemented using the NetSuite ERP System.
Fixed Asset Management in Oracle NetSuite
Fixed Asset Management within NetSuite automates the management of asset acquisition, depreciation, revaluation, retirement, as well as maintenance schedules and insurance. It also accommodates mid-life assets that can be imported into NetSuite. A fixed asset in NetSuite can be generated from Purchases, Expenses, and Inventory Transfers.
Cost Model in Oracle NetSuite
Cost Model in Oracle NetSuite = Initial Asset Cost + Installation Cost Incurred – Accumulated Depreciation as per the attached schedule.
Treatment in Income Statement and Balance Sheet:
- Initial Asset Cost and Installation Services = Asset
- Depreciation on the Asset for the Year = Expense
- Accumulated Depreciation Calculated over several years = Liabilities
- Disposal of Asset = Income
- Gain/Loss is a result of Cost – Disposal = Income/Expense
Revaluation Model in Oracle NetSuite
The Revaluation Model aligns with IAS 16, maintaining all concepts from the Cost Model. Typically, asset cost diminishes over time; however, under the Revaluation Model, asset prices may increase if market conditions dictate.
Revaluation Model in Oracle NetSuite = Fair Value as updated in NetSuite – Accumulated Depreciation as per the attached schedule.
Treatment in Income Statement and Balance Sheet:
- Initial Asset Cost and Installation Services = Asset
- Depreciation on the Asset for the Year = Expense
- Accumulated Depreciation Calculated over several years = Liabilities
- Disposal of Asset = Income
- Gain/Loss is a result of Cost – Disposal = Income/Expense
- Gain/Loss from Revaluation = Income/Expense
Disclosures
IAS 16 specifies reporting and disclosure requirements, which can be managed through customized reports and saved searches in NetSuite. Disclosure notes can also be enhanced using NetSuite Saved Searches to cover all mandatory disclosures necessary to adhere to IAS 16 standards. Therefore, the accounting models implemented in Oracle NetSuite align well with international accounting standards, ensuring consistency with global benchmarks.
