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Property, Plant and Equipment

Property, plant and equipment are physical long-term assets that include things such as land, buildings, machinery, furniture, and tools. Property, plant and equipment is often referred to in short form as "PP&E". PP&E may include natural resource properties; however, these are discussed under their own section at There are four major characteristics of property, plant and equipment:

1. Assets that fall in the PP&E category are acquired by the business in order to be used in operations. PP&E are not intended for resale in the ordinary course of business

2. PP&E are long-term in nature. The matchin principle requires that the cost of PP&E be amortized. This ensures that the costs of PP&E are expensed in the periods that benefit from them. 

3. PP&E must have a physical substance. This makes PP&E different from long-term assets such as patents and goodwill

4. PP&E is usually measured at historical cost. Historical cost includes both the costs of purchasing or acquiring the asset as well as the costs associated with transporting it to the needed location and preparing it (ensuring it is in the proper condition) for its intended use.

It is sometimes difficult for a company to determine whether an asset should be accounted for as inventory or as property, plant and equipment. In a manufacturing company, raw materials and supplies may be used for the construction or maintenance of long-term assets; rather than consumed by the production of inventory. Although technically these materials should not be accounted for as inventory, trade practice usually allows operating materials and supplies to be treated as inventory because (a) they are usually used within the period and (b) they are usually immaterial to the amount of inventory consumed in the production process.1 For example, a car repair shop may have a warehouse, machinery and tools for repairing vehicles that are considered PP&E. On the other hand, they may carry a number of spare parts, oils, and cleaning supplies. Traditionally, these latter items will be categorized as inventory if they have multiple uses and will be used within the period; on the other hand, items that have a designated use (such as replacement parts for one specific machine) or items that will not be used within the period are classified as PP&E. 


1.  FASB ASC 330-10-20

Categories within Property, Plant and Equipment

Disposition of Property, Plant and Equipment

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Here we look at the accounting treatment for property, plant and equipment which has been taken out of use in operations, is being held for sale, or is sold or scrapped.

Property, Plant and Equipment Attachments

There are two problems attached. Please finish the first problem on the first attach file, and finish the second problem on the second attach file (which is a template).