Introduction to PP&E

In this lesson

1. 0:00 Tangible non-current assets overview
2. 0:42 PPE definitions and recognition criteria
3. 2:00 Initial measurement and capitalisation rules
4. 4:37 Subsequent expenditure and capitalisation
5. 7:42 Capital versus revenue expenditure explained
6. 8:59 Worked example: Building construction costs
7. 12:30 Depreciation methods and useful life
8. 15:57 Depreciation revision illustration
9. 19:32 Complex assets and component depreciation

About this lesson

You'll discover what qualifies as PPE, how to measure it when you first acquire or build it, and crucially, how to decide whether costs should be capitalised on the statement of financial position or expensed through profit and loss. This is essential knowledge for Financial Accounting and Financial Reporting papers, where PPE questions appear regularly in both objective tests and case studies. The session covers initial measurement in detail, showing you which costs must be included when calculating the asset's value—from purchase price and delivery fees to dismantling costs and professional fees. You'll then explore subsequent expenditure, learning the key distinction between capital costs (which enhance the asset and get capitalised) and revenue costs (which maintain the asset and get expensed immediately). Through worked examples like Eagle and Co's factory build and Tripoli and Co's machine purchase, you'll see how to apply these principles in practice. The final part focuses on depreciation: how to spread an asset's cost over its useful life using methods like straight-line and reducing balance. You'll learn how to handle changes in depreciation estimates prospectively, and how to account for complex assets—those made up of separate components like aircraft with engines, buildings with extensions, or blast furnaces with linings—each depreciated over its own useful life. By the end, you'll feel confident tackling PPE questions and understanding the accounting treatment that underpins many exam scenarios.

Duration: 22m