What is IAS 16?

IAS 16 – referred to International Accounting Standard 16, outlines the accounting methodologies to be used governing Property, Plant and Equipment.

This standard covers all the ifs and buts to be considered for cost, disposal, depreciation, and revaluation of any asset falling under the criteria of Property, Plant and Equipment other than the ones covered by the later accounting standards specifically belonging to the respective assets.

Eg – IAS 41 covers biological assets used for Agriculture and the same will not be considered under IAS 16

Accounting Models Used in IAS 16

Cost Model

The asset is carried at cost less depreciation and impairment.

It adheres to the original asset cost till the end of life of the asset.

Revaluation Model

The asset is carried at revalued amounts. Fair Value at the date of revaluation – Depreciation and Impairment.

The Value of asset is dependent on market factors impacting the pricing.

Are these Models covered By Oracle NetSuite?

Yes. Both Cost and Revaluation Models have been added in Oracle NetSuite Fixed Assets Management Module.

Principles of recognition and accounting for Plant, Property and Equipment can be thoroughly followed using the NetSuite ERP System.

Fixed Asset Management in Oracle NetSuite

Fixed Asset Management in NetSuite provides automated management of asset’s acquisition, depreciation, revaluation, retirement as well as maintenance schedules and insurance.

FAM also covers mid-life assets which can be imported in NetSuite too.

A fixed asset in NetSuite can be created from Purchases, Expenses, and Inventory Transfers.

Cost Model in Oracle NetSuite

Cost Model as in Oracle NetSuite = Initial Asset Cost + Installation Cost Incurred- Accumulated Depreciation as per attached schedule

Treatment in Income Statement and Balance Sheet

– Initial Asset Cost and Installation Services = Asset

– Depreciation on the Asset for the Year = Expense

– Accumulated Depreciation Calculated over a period of years = Liabilities

– Disposal of Asset = Income

– Gain/Loss is further a result of Cost – Disposal = Income/Expense

Revaluation Model in Oracle NetSuite

Rest all concepts same as Cost Model, Revaluation in Oracle NetSuite takes its effect from IAS 16.

Where normally, the asset cost decreases over a period, however under the Revaluation Model, the asset price will go up if the market suggests.

Revaluation Model in Oracle NetSuite = Fair Value as updated in NetSuite – Accumulated Depreciation as per the attached schedule.

Treatment in Income Statement and Balance Sheet – Initial Asset Cost and Installation Services = Asset

– Depreciation on the Asset for the Year = Expense

– Accumulated Depreciation Calculated over a period of years = Liabilities

– Disposal of Asset = Income

– Gain/Loss is further a result of Cost – Disposal = Income/Expense

– Gain/Loss from Revaluation = Income/Expense

Disclosures

IAS 16 mentions reporting and disclosure requirements which can again be tackled by NetSuite customized reports and saved searches.

Disclosure Notes can be further added using NetSuite Saved Searches covering all the mandate disclosures to be made to reflect the IAS 16 statutes.

Thus, rest everything remaining the same, accounting models used in Oracle NetSuite are in sync with the International Accounting Standards making things relatable to the global standards.