Table of Contents

8.1 Accounting Standards

Infrastructure is a subset of property, plant and equipment and as such is accounted for under Australian Accounting Standard Board (AASB) 116 Property, Plant and Equipment (AASB 2015d) in Australia and New Zealand Accounting Standards Board (NZASB) IPSAS 17 in New Zealand (NZASB 2015).

The objective of AASB 116 Property Plant and Equipment and NZASB IPSAS 17 are to prescribe the accounting for such assets so that users of the financial report can discern information about an entity’s investment in them, and the changes therein. The major accounting issues are recognition, determination of carrying amounts, depreciation charges and impairment losses.

AASB 116 Property, Plant and Equipment applies to each entity required to prepare a general purpose financial report and/or is a reporting entity. Table 8.1 shows the scope and application of AASB 116 to types of assets.

Table 8.1: Scope and application of AASB 116 to types of assets

Type of assetAASB 116 appliesNote
Property, plant and equipment
  • AASB 116 applies, except when another standard requires or permits a different accounting treatment.
Leased property, plant and equipment
  • AASB 117 (2009b) Leases requires an entity to evaluate its recognition of an item of leased property, plant and equipment on the basis of the transfer of risks and rewards. However, other aspects of the accounting treatments for these assets, including depreciation, prescribed by AASB 116 apply.
Property being constructed, or developed, for future use as an investment property
  • AASB 116 applies, as the property does not yet meet the definition of an ‘investment property’ (AASB 140 Investment Property).
  • An entity using the cost model for investment property under AASB 140 must use the cost model in AASB 116.
Property, plant and equipment classified as held for sale


  • AASB 5 (2012a) Non-current Assets Held for Sale and Discontinued Operations applies.
Land under Roads
  • Transitional provisions under AASB 1051 (2014a) permit an entity to choose whether or not to recognise land under roads acquired before 31 December 2007. Land under roads acquired after this date must be accounted for in accordance with AASB 116.
Heritage and Cultural Assets
  • Paragraph Aus 6 of AASB 116 states that examples of property, plant & equipment are not limited to infrastructure, cultural, community and heritage assets. However, only those heritage and cultural assets that can be reliably measured are recognised. AASB 116 permits but does not require revaluation. Those assets that do not have limited lives may not be subject to depreciation. However, impairment testing is required when indicators of impairment exist.

Source: AASB (2015d).

Key terms used in AASB 116 and NZASB PBE IPSAS 17 are detailed in Table 8.2.

Table 8.2: Key terms used in AASB 116

Key termExplanation
Carrying amount
  • The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses.
Class of property, plant and equipment
  • A grouping of assets of a similar nature and use, e.g. land, land and buildings, machinery, ships, aircraft, motor vehicles, furniture and fixtures, and office equipment.
Commercial substance
  • Extent to which future cash flows are expected to change as a result of the transaction.
  • There are three sources for the cost of property, plant and equipment:
    • amount of cash, or cash equivalents paid, or the fair value of the other consideration given, to acquire an asset at the time of its acquisition or construction
    • amount attributed to that asset when initially recognised under AASB 116 Property, Plant and Equipment
    • amount attributed to that asset when initially recognised under other AASB, e.g. AASB 2 Share-based Payment.
Cost model
  • An item of property, plant and equipment is carried at its cost less any accumulated depreciation and any accumulated impairment losses.
Depreciable amount
  • The cost of an asset, or other amount substituted for cost, less its residual value.
Depreciated replacement cost
  • The current replacement cost of an asset less accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset.
  • The systematic allocation of the depreciable amount of an asset over its useful life.
Depreciation methods
  • Those methods used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include:
    • straight-line depreciation that results in a constant charge over the useful life where the residual value of the asset does not change
    • diminishing balance method results in a decreasing charge over the useful life
    • units of production method results in a charge based on the expected use or output.
Entity-specific value
  • The present value of the cash flows expected from the continuing use of an asset, and from its disposal at the end of its useful life or expected to incur when settling a liability.
Fair value
  • Price received by sale of an asset or payment to transfer a liability in an orderly transaction between market participants at the measurement date.
Impairment loss
  • The amount by which the carrying amount of an asset exceeds its recoverable amount.
Not-for-profit entity
  • One whose principal objective is not the generation of profit (a single entity or a group of entities comprising the parent and each of the entities that it controls).
Property, plant and equipment
  • Tangible items that are:
    • held for use in the production or supply of goods or services, for rental to others, or for administrative purposes
    • expected to be used during more than one period.
  • The term ‘tangible’ is not defined in AASB 116 (2015d), however, AASB 138 (2015b) Intangible Assets defines an intangible asset as an identifiable non-monetary asset without physical substance.
Recoverable amount
  • The higher of the net selling price of an asset and its value in use.
Repairs and maintenance
  • Costs of day-to-day servicing of property, plant and equipment that are primarily labour and consumables, and may include the cost of small parts.
Residual value
  • Estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.
Revaluation model
  • An item of property, plant and equipment whose fair value can be measured reliably, is carried at a revalued amount (i.e. its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses).
Useful life
  • Useful life is considered in the context of time or service:
  • Period over which an asset is expected to be available for use by the entity, or
  • Number of production or similar units expected to be obtained from the asset by an entity.

Source: AASB (2015d).