What is not included in Property, Plant & Equipment?
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Property, plant, and equipment (PP&E) typically include tangible assets that a company owns and uses in its operations for the production of goods or services. However, certain assets are not included in PP&E. These may include:
Intangible Assets:Assets such as patents, copyrights, trademarks, and goodwill are not included in PP&E because they lack physical substance.
Financial Assets:Investments in stocks, bonds, and other financial instruments are not considered part of PP&E.
Biological Assets:Assets such as livestock, agricultural crops, and timber are generally not classified as PP&E, although they may be recorded separately depending on accounting standards.
Inventory:Goods held for sale or raw materials used in production are not part of PP&E. They are typically categorized separately on the balance sheet.
Current Assets:Assets expected to be consumed or converted into cash within one year, such as cash, accounts receivable, and prepaid expenses, are not part of PP&E.
These exclusions are important for financial reporting purposes to provide a clear picture of a company’s assets, their nature, and their intended use.
Property, Plant & Equipment (PPE) doesn’t include the following items:-
1. Biological asset (other than bearer plant) related to agricultural activities.
Here bearer plant is a plant that-
a. is used in the production or supply of agricultural.
produce &
b. is expected to bear produce for more than 12
months &
c. Has a remote likelihood of being sold as
agricultural produce except for incidental scrap
sales.
2. Wasting assets including mineral rights, expenditure on the exploration for and extraction of mineral, oil, natural gas & similar non regenerative resources.
3. Investment property is not PPE and it should be accounted for only in accordance with the cost model as prescribed.