IPSAS 45
Active
Property, Plant and Equipment
Prescribes accounting for property, plant and equipment so users can discern an entity's investment in it and how that investment changes, covering recognition, measurement (historical cost and current value models), depreciation, impairment, derecognition, and disclosures including heritage assets. Effective 1 January 2025.
Active Standard
IPSAS 45 Property, Plant and Equipment is the current, active standard issued by the IPSASB for accounting for property, plant and equipment so users can discern an entity's investment in it and how that investment changes. It covers recognition, carrying amount determination, depreciation, impairment, derecognition, and disclosures including heritage assets. Effective for periods beginning on or after 1 January 2025.
IPSAS 45 is drawn primarily from IAS 16 Property, Plant and Equipment, but includes distinctive public-sector features: service potential in addition to economic benefits in the recognition test, deemed-cost measurement for non-exchange acquisitions, a dual current value basis (current operational value and fair value), class-based revaluation offsetting, dedicated unrecognized heritage asset disclosures, and the requirement to disclose the sum of individual-item revaluation surpluses/deficits within a class.
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Objective, Scope & Definitions (paras. 1–5)
Objective & scope
Prescribes accounting for PP&E so users can discern an entity's investment in it and how that investment changes – covering recognition, carrying amount determination, and depreciation/impairment charges.
Biological assets (except bearer plants, which ARE in scope – though their produce isn't) (IPSAS 27) Mineral rights/reserves (oil, gas, similar non-regenerative resources) PP&E classified held for sale (IPSAS 44) Exploration/evaluation asset recognition/measurement (IPSAS 50)
This Standard STILL applies to PP&E used to DEVELOP or MAINTAIN those excluded asset categories (para. 3). An entity using IPSAS 16's historical cost model for OWNED investment property must use the historical cost model here too, for consistency (para. 4).
Core definitions (para. 5)
Property, plant, and equipment
Tangible assets held for use in producing/supplying goods or services, for rental, or for administrative purposes, expected to be used for MORE THAN ONE reporting period.
Class of PP&E
A grouping of assets of similar nature or function, shown as a single disclosure item.
Depreciable amount
Cost (or a substitute amount), less residual value.
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Recognition – the Two-Part Test & Heritage Asset Carve-Out (paras. 6–10)
The recognition criteria
PROBABLE future economic benefits/service potential will flow to the entity Cost can be measured RELIABLY
No prescribed UNIT of measure – judgment applies: disaggregate significant components (e.g. floors of a building) where operational AND financial capacity objectives both apply, or AGGREGATE insignificant items (library books, peripherals) and apply the criteria to the aggregate (para. 8).
Heritage assets – a genuine recognition carve-out
If a heritage asset meets the ASSET definition but fails the RELIABLE MEASUREMENT criterion, it is NOT recognized – but specific NOTE DISCLOSURES (section 14) are still required. Once cost/current value information becomes available, the entity recognizes it from THAT DATE forward, applying ordinary measurement principles (para. 7).
Safety/environmental PP&E – required for regulatory reasons though not directly increasing any EXISTING asset's benefits – IS still recognized, because it enables the entity to derive future benefits from RELATED assets beyond what would otherwise be possible (para. 10).
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Initial Measurement – Elements of Cost (paras. 14–20)
What's INCLUDED (para. 14–15)
Purchase price (net of trade discounts/rebates), plus import duties/non-refundable taxes Directly attributable costs to bring the asset to its intended location/condition – site preparation, delivery/handling, installation/assembly, testing, professional fees, and directly attributable employee benefit costs Initial dismantling/removal/site-restoration cost estimates (IPSAS 19 basis)
What's EXCLUDED, and the cost recognition cutoff
Costs incurred while the asset sits idle before use, or operates below full capacity Initial operating losses (e.g. ramping up demand) Relocation/reorganization costs
Cost capitalization STOPS once the asset is in the location/condition necessary for its intended operation (para. 17). Non-exchange acquisitions are measured at DEEMED COST at the recognition date (para. 20) – a distinctive addition IAS 16 lacks (section 16). Deferred payment beyond normal credit terms → the price/payment difference is recognized as INTEREST over the credit period, unless capitalized under IPSAS 5's allowed alternative (para. 20).
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Exchanges of Assets – the Commercial Substance Test (paras. 21–23)
Default: current value – unless the exchange lacks substance
Cost of the acquired asset = its CURRENT VALUE – UNLESS the exchange lacks commercial substance, or neither asset's current value is reliably measurable, in which case cost = the CARRYING AMOUNT of the asset given up
Commercial substance – a two-condition test (para. 22)
The CONFIGURATION (risk, timing, amount) of cash flows/service potential DIFFERS between the asset received and given up – OR the portion of operations AFFECTED by the transaction changes That difference is SIGNIFICANT relative to the assets' current value
Reliable measurement: variability across the range of reasonable estimates isn't significant, OR probabilities across that range can be reasonably assessed. If only ONE side's value is reliably measurable, use THAT side's value to cost the asset received – unless the received asset's value is MORE clearly evident (para. 23).
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Subsequent Measurement – Choosing a Model (paras. 24–26)
One policy per CLASS, applied consistently
Choose EITHER the historical cost model OR the current value model – applied to an ENTIRE class of PP&E, not asset by asset
Historical cost model – cost, less accumulated depreciation and accumulated impairment losses (para. 26) Current value model – revalued amount (current operational value or fair value) at the revaluation date, less SUBSEQUENT accumulated depreciation and impairment (section 6, para. 27)
Where dismantling/restoration costs were built into initial measurement (section 3), subsequent measurement ALSO applies IPSAS 19's Appendix B guidance for that component (para. 25).
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The Current Value Model – Current Operational Value vs Fair Value (paras. 27–30)
The primary-objective test – a distinctive dual basis
Held primarily for OPERATIONAL capacity → CURRENT OPERATIONAL VALUE. Held primarily for FINANCIAL capacity → FAIR VALUE
Unlike IAS 16's single fair-value-only revaluation model, IPSAS 45 explicitly recognizes that MOST public sector PP&E is held to deliver services, not to generate a market return – hence the dual basis (section 16). The chosen basis is applied CONSISTENTLY at each measurement date, UNLESS the primary holding objective itself changes (para. 28).
Revaluation frequency – "sufficient regularity," not a fixed cycle
Revalue often enough that carrying amount doesn't MATERIALLY differ from current value at the reporting date (para. 29) VOLATILE assets → annual revaluation may be needed STABLE assets → every three to five years may suffice (para. 30)
Impairment losses/reversals (IPSAS 21/26) do NOT automatically trigger a full class revaluation (para. 33).
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Revaluation Mechanics – Class-Based, Not Asset-Based (paras. 31–40)
Two restatement methods, and the whole-class rule
Gross carrying amount RESTATED consistently with the revaluation (by observable market data, or proportionately to the carrying-amount change), with accumulated depreciation adjusted to the difference – OR Accumulated depreciation ELIMINATED against gross carrying amount (para. 31)
If ONE asset in a class is revalued → the ENTIRE class must be revalued (para. 32)
Assets similar in NATURE but held for DIFFERENT functions may form separate classes (e.g. agricultural land vs. commercial land) – potentially mixing historical cost for one class and current value for another (para. 34). Simultaneous revaluation within a class avoids mixing costs/values from different dates – though a ROLLING revaluation is allowed if completed quickly and kept up to date (para. 35).
Increases, decreases & the offsetting rule
INCREASE → revaluation surplus (net assets/equity) directly – UNLESS reversing a prior DECREASE for the SAME CLASS previously in surplus/deficit (para. 36) DECREASE → surplus or deficit – UNLESS offsetting an existing revaluation surplus CREDIT for that SAME CLASS (para. 37) Individual-asset increases/decreases WITHIN a class ARE offset against each other – but NEVER across DIFFERENT classes (para. 38)
Revaluation surplus may transfer to accumulated surplus/deficit on derecognition, OR progressively as the asset is used (the difference between revalued-basis and original-cost-basis depreciation) – but NEVER through surplus or deficit itself (para. 39).
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Depreciation – the Component Approach (paras. 41–51)
Significant parts, depreciated separately
Each SIGNIFICANT part (relative to the item's total cost/value) is depreciated SEPARATELY – parts sharing the same useful life/method may be grouped; the REMAINDER is depreciated too, using approximation if needed
The depreciation charge goes to surplus/deficit each period – UNLESS absorbed into another asset's cost (e.g. manufacturing plant depreciation folded into IPSAS 12 inventory cost, or into an IPSAS 31 intangible under development) (paras. 45–46).
Land vs buildings, and depreciation despite good maintenance
Land and buildings are ALWAYS separated, even acquired together – land usually has an INDEFINITE life (exceptions: quarries, landfill sites) and isn't depreciated; buildings usually have a FINITE life and ARE (para. 50) Depreciation continues even if current value EXCEEDS carrying amount, as long as residual value doesn't exceed carrying amount – repair/maintenance, or its ABSENCE, doesn't negate the need to depreciate (para. 49) Poor maintenance from budget constraints → REASSESS useful life and/or test for impairment, rather than simply accepting a longer apparent life (para. 49)
Residual value and useful life are reviewed AT LEAST annually – changes are accounted for as IPSAS 3 accounting ESTIMATE changes, not restatements (para. 48).
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Finite vs Indefinite Useful Life (paras. 52–58)
The rebuttable presumption, and "no foreseeable limit"
Rebuttable presumption: NON-LAND PP&E has a FINITE useful life
Indefinite life applies only where there's NO FORESEEABLE LIMIT to the period the asset provides service potential or generates net cash inflows, based on ALL relevant factors (para. 52). "Indefinite" does NOT mean "infinite" – the conclusion must be REALISTIC, not optimistic, and should NOT depend on planned future spending beyond current-standard maintenance, or on preservation actions with no realistic likelihood under present/projected budget constraints (para. 54).
Depreciation consequence, and the annual review requirement
FINITE life → depreciated. INDEFINITE life → NOT depreciated (para. 53) Uncertainty about a VERY LONG useful life does NOT justify choosing an unrealistically SHORT one instead (para. 55) Indefinite-life PP&E is reviewed ANNUALLY for impairment indications (IPSAS 21/26), regardless of whether any indication otherwise exists (para. 56)
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Impairment & Compensation for Impairment (paras. 59–61)
Impairment – a cross-reference, not new mechanics
IPSAS 45 does NOT contain its own impairment mechanics – it applies IPSAS 21 (non-cash-generating) or IPSAS 26 (cash-generating), as appropriate, for testing, recognizing, and reversing impairment losses (para. 59).
Four SEPARATE economic events, four separate treatments
IMPAIRMENT of the asset → IPSAS 21/26 DERECOGNITION of a retired/disposed asset → this Standard (section 11) COMPENSATION from third parties for impairment/loss/give-up → surplus or deficit, when it becomes RECEIVABLE Cost of REPLACEMENT assets (restored, purchased, constructed, developed) → this Standard's initial measurement rules (section 3)
These four are treated as entirely INDEPENDENT events – compensation receivable doesn't offset or delay recognizing the underlying impairment (paras. 60–61).
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Derecognition (paras. 62–68)
Two triggers, and the gain/loss formula
Derecognize on DISPOSAL, or when NO future economic benefits/service potential is expected from use or disposal
Gain/loss = net disposal proceeds − carrying amount → surplus or deficit at derecognition (unless IPSAS 43 requires otherwise for a sale and leaseback)
Disposal date = when the recipient obtains CONTROL, per IPSAS 47's control-transfer/obligation-satisfaction tests (para. 64). Transaction consideration follows IPSAS 47 paras. 109–132, with subsequent changes ALSO following IPSAS 47's own change-in-consideration rules (para. 67).
Part replacements, and rental assets transferred to inventory
Recognizing a REPLACEMENT part's cost → derecognize the REPLACED part's carrying amount, regardless of whether it was depreciated separately; if impracticable to determine, the replacement cost may indicate the replaced part's original cost (para. 65) An entity that ROUTINELY rents out PP&E and then sells it → transfer to INVENTORY at carrying amount when rental ceases and sale intent begins; sale proceeds → IPSAS 47 revenue, NOT IPSAS 44 (para. 68)
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Heritage Assets, Infrastructure Assets & Weapons Systems (paras. AG2–AG11)
Heritage & infrastructure – distinguishing characteristics
CategoryTypical characteristics
Heritage assetsUse/disposal restrictions; IRREPLACEABLE; long, sometimes indefinite useful lives. Examples: historic buildings, monuments, museum collections, works of art
Infrastructure assetsComprise NETWORKS or SYSTEMS; long useful lives, continually maintained/replaced. Examples: electricity transmission networks, road networks, water systems (dams, pipelines, treatment plants)
Heritage items used purely for public benefit CAN still be resources with service potential – e.g. making heritage accessible to the public IS itself an entity objective, satisfying the asset definition (para. AG9).
Weapons systems, and the control test
Weapons systems NORMALLY meet the PP&E definition – warships, submarines, military aircraft, tanks, missile carriers/launchers used CONTINUOUSLY in defense service, even if peacetime use is purely deterrence. Some SINGLE-USE items (certain ballistic missiles) can still qualify, since their ongoing DETERRENCE service is itself the benefit (para. AG7).
Control indicators for uncertain public sector items (para. AG10): legal ownership; ability to permit/deny/restrict access; means to ensure the resource achieves objectives; enforceable right to service potential/economic benefits. NO SINGLE indicator dominates – legal ownership WITHOUT the ability to direct use/benefit may NOT establish control, while its ABSENCE doesn't necessarily preclude control either (para. AG11).
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Disclosure Requirements – General (paras. 69–76)
Per class of PP&E (para. 69)
Measurement basis for the gross carrying amount Depreciation methods used Useful lives OR depreciation rates used Gross carrying amount and accumulated depreciation (+ impairment) at period start/end A RECONCILIATION – additions, held-for-sale/other disposals, revaluation increases/decreases, impairment losses/reversals, depreciation, exchange differences, other changes
Encouraged (not required) extras (para. 76)
Carrying amount of TEMPORARILY IDLE PP&E Gross carrying amount of any FULLY DEPRECIATED PP&E still in use Carrying amount of PP&E RETIRED from active use, not classified held for sale Current value (when historical cost model used) IF materially different from carrying amount
Also required: revalued-class disclosures (revaluation effective date, whether an independent valuer was involved, methods/assumptions, SUM of all revaluation surpluses/deficits for individual items within the class – a disclosure IAS 16 lacks, section 16) (paras. 72–75).
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Disclosure – Unrecognized Heritage PP&E & Current Value Measurement (paras. 77–80)
Unrecognized heritage assets – a dedicated package (para. 77)
The DIFFICULTIES in obtaining a reliable measurement that prevented recognition The SIGNIFICANCE of the unrecognized item to delivering the entity's objectives
This disclosure package has NO IAS 16 equivalent (section 16) – a direct consequence of the section 2 recognition carve-out. Once subsequent expenditure on such an asset IS recognized, the full ordinary disclosure package (section 13, section 14) applies (para. 78).
Current value measurement – the familiar fair value hierarchy package
Valuation techniques and inputs used for items measured at current operational value or fair value after initial recognition For Level 3 fair value (or unobservable-input current operational value) measurements: the EFFECT on surplus/deficit or net assets/equity for the period
Same judgment-based approach as elsewhere in this library: level of detail, emphasis, aggregation/disaggregation, and whether additional information is needed (paras. 79–80).
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Effective Date & Amendment Timeline (paras. 85–85C)
Amendment history at a glance
Base Standard: periods beginning on/after 1 January 2025 – earlier application requires SIMULTANEOUS adoption of IPSAS 43, IPSAS 44, and IPSAS 46 (para. 85).
EffectiveChange
1 Jan 2026Paras. 64, 67, 68 – IPSAS 47, Revenue (May 2023)
1 Jan 2027Para. 3 – IPSAS 50, Exploration for and Evaluation of Mineral Resources (Nov 2024)
1 Jan 2026Para. 25 – Amendments to IPSAS Standards: Specific IFRIC Interpretations (Jan 2025)
IPSAS 45 sits at the center of the 2022–2025 companion-Standard wave (43, 44, 45, 46, 47, 50) – its own amendment schedule reflects dependencies on nearly all of them.
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Relationship to IAS/IFRS – Comparison with IAS 16
Comparison – IPSAS 45 vs IAS 16
IPSAS 45 is drawn primarily from IAS 16 (issued Dec 2003, amendments to March 2018), Property, Plant and Equipment.
TopicDifference
Service potentialIPSAS 45 refers to BOTH "economic benefits" AND "service potential" in recognition; IAS 16 refers only to economic benefits
Non-exchange acquisitionsIPSAS 45 REQUIRES deemed-cost measurement at initial recognition (section 3); IAS 16 has no equivalent
Subsequent measurement modelsIPSAS 45: historical cost AND current value. IAS 16: cost AND revaluation
Current value basesIPSAS 45 offers TWO bases within its current value model – current operational value AND fair value (section 6). IAS 16's revaluation model has only ONE – fair value
Revaluation offsettingIPSAS 45 offsets increases/decreases WITHIN A CLASS (section 7); IAS 16 offsets on an individual ASSET basis
Unrecognized heritage assetsIPSAS 45 has a DEDICATED disclosure requirement (section 14); IAS 16 has none
Equivalent historical cost disclosureIPSAS 45 does NOT require disclosing the equivalent historical-cost amount for revalued items; IAS 16 DOES
Sum of individual-item revaluationsIPSAS 45 REQUIRES disclosing the sum of revaluation surpluses/deficits for individual items within a class; IAS 16 has no equivalent
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Statement / Process Mapping
Master decision map
- Does the item meet the PP&E definition, and the two-part recognition test? Heritage item failing reliable measurement → NOT recognized, but disclosed (section 2, section 14)
- Measure initial COST – all directly attributable costs, stopping once the asset is ready for intended use; non-exchange acquisitions → deemed cost (section 3)
- Acquired via EXCHANGE? → apply the commercial substance test to determine current value vs. carrying-amount-based cost (section 4)
- Choose ONE subsequent measurement policy per CLASS – historical cost, or current value (section 5). If current value → determine current OPERATIONAL value or FAIR value based on the primary holding objective (section 6)
- Depreciate significant components separately over the asset's useful life – UNLESS the life is genuinely INDEFINITE, in which case test for impairment annually instead (section 8, section 9)
- On disposal or when no further benefit is expected → derecognize, recognizing any gain/loss in surplus or deficit (section 11)
Concept-to-statement mapping table
IPSAS 45 conceptStatement(s)Notes
PP&E carrying amountSOFPHistorical cost or revalued amount, less depreciation/impairment
Depreciation chargeSOFPerfOr absorbed into another asset's cost
Revaluation increaseNA/EUnless reversing a prior class-level decrease in surplus/deficit
Revaluation decreaseSOFPerfUnless offset against existing class-level revaluation surplus
Compensation for impairment/lossSOFPerfWhen it becomes receivable
Gain/loss on derecognitionSOFPerfNet proceeds less carrying amount
Reconciliation, methods, unrecognized heritage itemsNotesMandatory disclosures, paras. 69–80
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Related Standards – Cross-Reference Map
How IPSAS 45 connects across the IPSAS body of literature
StandardNature of the connection
IPSAS 3Governs useful life/residual value/depreciation method changes as accounting estimate changes (section 8, section 9)
IPSAS 5Allowed alternative for capitalizing deferred-payment interest (section 3)
IPSAS 12Governs dismantling/restoration obligation costs tied to inventory production; depreciation absorbed into inventory cost (section 3, section 8)
IPSAS 16Historical cost model consistency requirement for owned investment property (section 1)
IPSAS 19Dismantling/restoration obligation recognition and Appendix B subsequent measurement (section 3, section 5)
IPSAS 21 / 26All impairment testing, recognition, and reversal for PP&E (section 10)
IPSAS 27Bearer plants are IN scope here; their produce is not; defines biological asset scope carve-outs (section 1)
IPSAS 31Depreciation absorbed into intangible asset development cost (section 8)
IPSAS 39Directly attributable employee benefit costs included in initial PP&E cost (section 3)
IPSAS 43Simultaneous early-adoption requirement; right-of-use asset depreciation cross-reference
IPSAS 44PP&E classified held for sale exits this Standard's scope entirely (section 1)
IPSAS 46Fair value and current operational value measurement methodology (section 6)
IPSAS 47Transaction consideration determination on disposal/derecognition (section 11)
IPSAS 50Exploration/evaluation asset recognition/measurement excluded from this Standard's scope (section 1)
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Quick-Reference Glossary
Property, plant, and equipment
Tangible assets held for use in production, supply, rental, or administration, expected to be used for more than one period.
Class of PP&E
A grouping of assets of similar nature or function, shown as a single disclosure item.
Depreciable amount
Cost (or a substitute amount), less residual value.
Residual value
The estimated amount currently obtainable from disposal, after disposal costs, as if the asset were already at the age and condition expected at the end of its useful life.
Current operational value
The amount the entity would pay for the remaining service potential of an asset held primarily for operational capacity.
Heritage assets
Assets of rarity or significance – archeological, architectural, cultural, historical, or scientific – typically irreplaceable.
Financial statement key
SOFP Statement of financial position
SOFPerf Statement of financial performance
NA/E Net assets/equity (statement of changes)