ASC 360
Active
Property, Plant, and Equipment
Governs property, plant, and equipment including initial measurement, depreciation, impairment, componentization, and assets held for sale.
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Conceptual Framework Linkage
Long-lived, tangible, held for use
PP&E represents an entity's long-lived, tangible resources held for use in production, supply, rental, or administration – expected to generate economic benefit across MULTIPLE periods, which is precisely why systematic DEPRECIATION (rather than immediate expensing) is the appropriate matching mechanism. ASC 360 governs recognition, subsequent measurement, and impairment of these assets.
Broadly converged core, with two headline divergences
ASC 360 and IAS 16 share the same basic recognition and depreciation philosophy, but diverge on two well-known, heavily tested points: the ABSENCE of a revaluation model under US GAAP (Section 6), and the different STRUCTURE of the impairment test (Section 8) – both genuinely consequential differences worth knowing well.
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Scope & Applicability
Tangible long-lived assets used in operations
ASC 360 applies to tangible long-lived assets held for USE, including land, buildings, machinery, equipment, and similar items – as well as governing the broader model for testing ALL long-lived assets (including finite-lived intangibles, per the ASC 350 cross-reference) for impairment.
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Initial Recognition & Measurement
Cost basis, converged with IAS 16
PP&E is initially recognised at COST – the purchase price plus directly attributable costs of bringing the asset to the location and condition necessary for its intended use (delivery, installation, professional fees, and, where applicable, the estimated cost of dismantling and removing the asset per ASC 410) – the SAME initial measurement principle IAS 16 applies.
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Componentization – Permitted, Not Required
A meaningful practical divergence from IAS 16
US GAAP PERMITS depreciating significant components of an asset separately, where those components have materially different useful lives – but does NOT REQUIRE it. IAS 16, by contrast, REQUIRES component depreciation for any significant component with a useful life differing materially from the asset as a whole. In practice, this means many US preparers depreciate an entire asset (e.g. a building) as a single unit, while an IFRS preparer with the SAME building would be required to separately depreciate, say, the roof, HVAC system, and structural shell at their own distinct useful lives – a genuine practical difference in how depreciation expense unfolds over time for economically identical assets.
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Depreciation Methods
A broad menu, converged with IFRS
Straight-line, declining-balance, sum-of-the-years'-digits, and units-of-production methods are all available, chosen to reflect the pattern in which the asset's economic benefits are consumed – the same general menu and selection principle IAS 16 applies.
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No Revaluation Model – Historical Cost Only
One of the most famous US GAAP/IFRS divergences
US GAAP permits ONLY the historical COST model for PP&E – there is NO election available to revalue an asset upward to fair value. IAS 16 permits an OPTIONAL REVALUATION MODEL, under which an entire class of PP&E may be carried at fair value at the date of revaluation, with increases generally recognised in OCI (a "revaluation surplus"), and decreases recognised in profit or loss (unless reversing a previous increase). This absence of any revaluation option is a foundational, heavily tested difference – alongside LIFO for inventory, it's one of the classic "textbook" US GAAP/IFRS divergences.
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Subsequent Costs
Capitalise if the asset's future benefit is enhanced
Costs incurred after initial recognition are capitalised only if they EXTEND the asset's useful life, INCREASE its capacity, or IMPROVE the efficiency/quality of output – otherwise, they are expensed as ordinary repairs and maintenance, the same general principle IAS 16 applies.
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Impairment – the Two-Step Recoverability Model
The same two-step model already introduced for finite-lived intangibles (ASC 350)
PP&E held and used is tested for impairment only when INDICATORS exist, using the SAME two-step model applied to finite-lived intangibles: Step 1 (recoverability) compares carrying amount to expected future UNDISCOUNTED cash flows – if carrying amount is LESS, no impairment is recognised, regardless of fair value. Only if the asset FAILS this screen does Step 2 apply, measuring impairment as the excess of carrying amount over FAIR VALUE. IAS 36 instead uses a SINGLE-STEP test comparing carrying amount directly to recoverable amount, with no undiscounted-cash-flow screen – meaning identical facts can produce delayed impairment recognition under US GAAP relative to IFRS (see the ASC 350 poster for a full worked illustration). Unlike goodwill, impairment losses on PP&E MAY be reversed under IFRS if circumstances improve – but NEVER under US GAAP, once recognised.
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Assets Held for Sale
Criteria closely paralleling IFRS 5
An asset is classified as HELD FOR SALE when management commits to a plan to sell, the asset is available for immediate sale in its current condition, an active programme to locate a buyer is underway, sale is probable within one year, and the asset is being actively marketed at a reasonable price – closely mirroring IFRS 5's own criteria. Once classified, the asset is measured at the LOWER of carrying amount and fair value less costs to sell, and DEPRECIATION CEASES.
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Real Estate Sales (360-20)
Largely superseded by ASC 606/842
Subtopic 360-20 historically provided detailed guidance on recognising gains on real estate sales, particularly sale-leaseback transactions – MOST of this guidance has since been SUPERSEDED by ASC 606 (revenue recognition) and ASC 842 (leases), which now govern the analogous fact patterns using their general models, leaving 360-20's remaining scope quite narrow.
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Worked Example – Component vs Whole-Asset Depreciation
The same building, two different depreciation patterns
Example: A building with a roof requiring earlier replacement
A building costs $10,000,000, with a $1,500,000 roof component expected to need replacement in 15 years, while the remaining structure has a 40-year useful life.
Under US GAAP (component depreciation not required): the entity MAY simply depreciate the full $10,000,000 over 40 years – $250,000/year – without separately tracking the roof.
Under IAS 16 (component depreciation REQUIRED): the entity MUST separately depreciate the $1,500,000 roof over 15 years ($100,000/year) and the remaining $8,500,000 over 40 years ($212,500/year) – a combined $312,500/year, MATERIALLY higher than the simple US GAAP approach, and requiring a full roof replacement/derecognition entry at year 15 that the non-componentized US approach would not separately track.
Under IAS 16 (component depreciation REQUIRED): the entity MUST separately depreciate the $1,500,000 roof over 15 years ($100,000/year) and the remaining $8,500,000 over 40 years ($212,500/year) – a combined $312,500/year, MATERIALLY higher than the simple US GAAP approach, and requiring a full roof replacement/derecognition entry at year 15 that the non-componentized US approach would not separately track.
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Worked Example – the Revaluation Model's Absence
Land that has appreciated significantly
Example: Land purchased decades ago
An entity purchased land 30 years ago for $2,000,000. Its current fair value is $9,000,000.
Under US GAAP: the land REMAINS on the Balance Sheet at $2,000,000 (land is not depreciated but also never revalued upward) – the $7,000,000 of appreciation is simply NEVER reflected in the financial statements until the land is eventually sold.
Under IAS 16, if the entity ELECTS the revaluation model for its land asset class: the land could be revalued to $9,000,000, with the $7,000,000 increase recognised in OCI as a revaluation surplus – a fundamentally different balance sheet presentation for the identical underlying asset.
Under IAS 16, if the entity ELECTS the revaluation model for its land asset class: the land could be revalued to $9,000,000, with the $7,000,000 increase recognised in OCI as a revaluation surplus – a fundamentally different balance sheet presentation for the identical underlying asset.
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Worked Example – the Two-Step Impairment Test
A manufacturing plant passing the recoverability screen
Example: Equipment with declining fair value but sufficient undiscounted cash flows
Manufacturing equipment has a carrying amount of $4,000,000. Expected future undiscounted cash flows total $4,300,000. Fair value, however, is estimated at only $3,200,000.
Step 1: Undiscounted cash flows ($4,300,000) EXCEED carrying amount ($4,000,000) – the asset PASSES, and NO impairment is recognised under US GAAP.
Under IAS 36, comparing carrying amount ($4,000,000) directly to recoverable amount (potentially the $3,200,000 fair value figure, if higher than value in use) would likely produce an $800,000 impairment loss that the US GAAP screen entirely avoids.
Under IAS 36, comparing carrying amount ($4,000,000) directly to recoverable amount (potentially the $3,200,000 fair value figure, if higher than value in use) would likely produce an $800,000 impairment loss that the US GAAP screen entirely avoids.
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Disclosure Requirements
What ASC 360 requires
Depreciation expense for the period, and balances of major classes of depreciable assetsDepreciation methods used, by major classImpairment losses recognised, and the facts and circumstances leading to the impairmentCarrying amount of assets classified as held for sale
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether to componentize an asset, even though not requiredWhether the held-for-sale classification criteria are genuinely metIdentifying impairment indicators triggering the two-step test
SIGNIFICANT ESTIMATES
Useful lives and residual valuesUndiscounted and discounted future cash flow projections for the recoverability/impairment tests
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ASC 360 vs IAS 16 – Comprehensive Comparison
Comparison – ASC 360 vs IAS 16
FeatureUS GAAP (ASC 360)IFRS (IAS 16)
Revaluation modelNOT available – historical cost onlyOPTIONAL, by asset class
Component depreciationPermitted, not requiredREQUIRED for significant components with differing useful lives
Impairment test structureTwo-step – undiscounted recoverability screen, then fair valueSingle-step – carrying amount vs recoverable amount directly
Reversal of impairmentNOT permittedPERMITTED if circumstances improve
Held-for-sale criteria and measurementLower of carrying amount and fair value less costs to sellSame measurement basis under IFRS 5 – closely converged
Alongside LIFO for inventory, the absence of a revaluation model is probably the single most iconic, widely-taught US GAAP/IFRS accounting difference – a genuinely foundational point for comparative study.
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Statement Mapping
Where every ASC 360 event lands
EventStatement(s) affectedNotes
Depreciation expenseBS ISSystematic allocation over useful life
Impairment loss (Step 2 triggered)BS ISNever reversed once recognised
Classification as held for saleBSDepreciation ceases; measured at lower of carrying amount and FV less costs to sell
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Related Topics
Cross-reference map
TopicConnection
ASC 410Supplies asset retirement obligation guidance that adds to a PP&E asset's initial cost
ASC 350Uses the same two-step impairment model for finite-lived intangibles
ASC 842Leases – supersedes much of the former real estate sale-leaseback guidance in 360-20
Quick-reference glossary preview
Recoverability test
Step 1 of the two-step US GAAP impairment model, comparing carrying amount to undiscounted future cash flows.
Componentization
Separately depreciating significant parts of an asset with materially different useful lives – required under IAS 16, merely permitted under ASC 360.
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Quick-Reference Glossary
Revaluation model
An IAS 16 measurement option carrying PP&E at fair value, unavailable under US GAAP.
Held for sale
A classification for assets meeting specific sale-readiness criteria, measured at the lower of carrying amount and fair value less costs to sell, with depreciation ceasing.
Two-step impairment model
The US GAAP recoverability screen (undiscounted future cash flows vs carrying amount) followed, only if failed, by a fair value measurement of impairment.
Componentization
The practice of separately depreciating significant components of an asset with differing useful lives – permitted but not required under ASC 360.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows