AS 10 Property, Plant and Equipment: A Practitioner Guide for FY 2026-27
AS 10 (Property, Plant and Equipment) is the Indian Accounting Standard that prescribes the accounting treatment for tangible fixed assets used in operations over more than one year. It sets out how companies must recognise, measure, depreciate, and disclose property, plant and equipment (PPE) in their financial statements.
The Ministry of Corporate Affairs notified revised AS 10 via the Companies (Accounting Standards) Amendment Rules, 2016. This standard became effective from 1 April 2017 and superseded both the original AS 10 (Accounting for Fixed Assets) and AS 6 (Depreciation Accounting).
For FY 2026-27, the most significant impact remains mandatory component-wise depreciation. In our audit practice we frequently observe manufacturing entities reclassifying asset registers to comply with this requirement.
AS 10 at a Glance
AS 10 establishes the principle that property, plant and equipment must be recognised as assets if future economic benefits are probable and cost can be measured reliably. The standard primarily serves Indian companies not covered by Ind AS but required to prepare financial statements under the Companies Act.
| Field | Value |
|---|---|
| Standard Number | AS 10 |
| Full Name | Property, Plant and Equipment |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Accounting Standards) Amendment Rules, 2016, reaffirmed in Companies (Accounting Standards) Rules, 2021 |
| Effective Date | 1 April 2017 (revised AS 10) |
| Supersedes | Original AS 10 (Accounting for Fixed Assets) and AS 6 (Depreciation Accounting), both superseded |
| Equivalent Standard | AS 10 ↔ Ind AS 16 ↔ IAS 16 |
| Applies To | All Level I, Level II, and Level III enterprises preparing financial statements under the Accounting Standards framework. Ind AS-applicable companies follow Ind AS 16 instead. Revised AS 10 replaced both the original AS 10 (Fixed Assets) and AS 6 (Depreciation Accounting). |
What is AS 10: Property, Plant and Equipment?
AS 10 sets out how an enterprise must account for tangible assets held for use in production or supply of goods or services, rental to others or administrative purposes over periods longer than one year. The standard governs initial recognition at cost, subsequent measurement using either the cost or revaluation model, component-wise depreciation based on useful life of significant parts of assets, impairment triggers and derecognition requirements.
ICAI introduced revised AS 10 in line with global best practices to address inconsistencies in fixed asset accounting across Indian companies. The revision merged depreciation guidance from old AS 6 into a single comprehensive PPE standard. It also aligned Indian GAAP with Ind AS 16/IAS 16 on key areas such as component depreciation.
This standard is most relevant to CFOs of non-Ind AS companies, statutory auditors performing audits under SA 700 and CA students preparing for exam questions on fixed asset accounting.
Objective of AS 10
- Prescribe the accounting treatment for property, plant and equipment so that users can discern information about the enterprise's investment in such assets.
- Specify principles for the recognition of PPE, determination of carrying amounts, depreciation charges and impairment indicators.
- Establish disclosure requirements relating to PPE in the financial statements.
These objectives ensure that financial statements present a true and fair view as required by Section 129 of the Companies Act, 2013. Reliable PPE information supports investor confidence by enabling transparent assessment of a company's operational asset base.
Who Must Apply AS 10?
Entities covered
All Level I (large), Level II (medium), and Level III (small) enterprises preparing financial statements under Indian Accounting Standards notified by the Ministry of Corporate Affairs must apply revised AS 10 from FY 2017-18 onwards unless they have transitioned to Ind AS.
| Entity Type | Applicability |
|---|---|
| Level I | Mandatory |
| Level II | Mandatory |
| Level III | Mandatory |
| Ind AS companies | Not applicable; follow Ind AS 16 |
Scope exclusions
The following items are outside the scope of revised AS 10:
- Inventories of biological assets or agricultural produce harvested before harvest point
- Wasting assets such as mineral rights or mineral reserves
- PPE classified as held for sale
- Investment property where separate industry guidance applies
When the standard does not apply
Inventories of biological assets are covered under separate agricultural standards or industry guidance. Mineral rights fall outside accounting standards scope due to their wasting nature. PPE held for sale is governed by specific disposal guidance where applicable. Investment property receives separate treatment if industry guidance exists; otherwise it falls within general PPE rules.
Key Definitions under AS 10
| Term | Definition |
|---|---|
| Property, plant and equipment (PPE) | Tangible assets held for use in production/supply/rental/administration expected to be used over one year. |
| Cost | Amount paid or fair value given to acquire an asset. |
| Carrying amount | Recognised amount after deducting accumulated depreciation/impairment losses from cost. |
| Depreciation | Systematic allocation of depreciable amount over useful life of an asset. |
| Useful life | Period or number of units over which an asset is expected to be available for use. |
| Component | Significant part of PPE item requiring separate depreciation due to materiality/significance. |
Recognition and Measurement under AS 10
When to recognise
An enterprise recognises an item as property, plant or equipment when it expects future economic benefits will flow from its use or disposal and it can reliably measure its cost. Recognition occurs at acquisition or construction completion.
If either condition fails, such as uncertain benefit inflow or unreliable cost estimation, the expenditure is expensed rather than capitalised.
Initial measurement
At initial recognition, PPE is measured at cost.
Cost comprises:
Purchase price net of trade discounts/rebates.
Directly attributable costs bringing asset into working condition, site preparation; delivery/handling; installation; professional fees.
Initial estimate of dismantling/site restoration costs if there is a present obligation.
Borrowing costs directly attributable to acquisition/construction per AS 16.
Indirect overheads not directly related to bringing an asset into use are excluded from capitalisation.
**Formula:**
**Initial Cost = Purchase Price + Directly Attributable Costs + Dismantling/Site Restoration Provision + Capitalised Borrowing Costs**
If payment terms are deferred beyond normal credit period then cost equals cash price equivalent; excess over cash price is treated as interest expense over credit period.
Subsequent measurement
After initial recognition an enterprise selects either:
Cost Model: Carry at cost less accumulated depreciation/impairment losses.
Revaluation Model: Carry at fair value based on periodic revaluations less subsequent accumulated depreciation/impairment losses.
The chosen model applies consistently across each class of PPE, mixing models within a class is prohibited.
If using revaluation model:
Revalue entire class together, not selectively.
Increase credited directly to revaluation surplus unless reversing previous decrease charged to profit/loss.
Decrease debited first against any related surplus then profit/loss balance.
Depreciate revalued amount prospectively over remaining useful life.
Component-wise depreciation remains mandatory irrespective of model chosen.
Mandatory Component Depreciation (Revised AS 10)
Revised AS 10 requires each significant part (“component”) with distinct useful life/cost profile within an item be depreciated separately, aligning with Ind AS 16/IAS 16 globally.
For example:
A manufacturing plant’s structure may last twenty-five years while major motors last only eight years; both must be separately identified/depreciated based on their respective useful lives/costs if material relative to total asset value.
Schedule II to Companies Act specifies minimum useful lives by asset class but allows deviation where technically justified, such deviation must be disclosed with reasons in notes forming part of accounts.
Replacement costs incurred during major overhaul/refurbishment are capitalised only if they meet recognition criteria; replaced components are derecognised from books immediately upon replacement so double-counting does not arise.
Provisions created for dismantling/site restoration at inception increase initial carrying amount; subsequent changes in estimate adjust both provision/PPE carrying value prospectively per AS 29.
Failure to implement component approach leads directly to non-compliance findings during statutory audit, especially post-FY 2017-18 amendment effective date.
Worked Examples on AS 10
Example 1: Component depreciation for a manufacturing plant
Krishna Steel Industries acquires a steel rolling mill for Rs 40 crore on April 1st 2025 comprising structure (useful life twenty-five years), major motors costing Rs 6 crore (eight-year life), hydraulic systems costing Rs 4 crore (twelve-year life), remainder being structural building worth Rs 30 crore.
Computation Table
| Component | Cost | Useful Life | Annual Depreciation |
|---|---|---|---|
| Structure | Rs 30 crore | Twenty-five years | Rs 1.20 crore |
| Major Motors | Rs 6 crore | Eight years | Rs 0.75 crore |
| Hydraulic Systems | Rs 4 crore | Twelve years | Rs 0.33 crore |
Total annual depreciation in Year 1 = Rs 2.28 crore.
Journal Entry
Annual:
Dr Depreciation Expense
Rs 2.28 crore
Cr Accumulated Depreciation, PPE, Structure/Motors/Hydraulics
Rs 2.28 crore
Example 2: Capitalisation of dismantling cost
Maharashtra Cement Ltd installs a captive solar plant on leased land costing Rs 8 crore on April 1st 2025; lease requires dismantling after twenty years with present value estimated at Rs 50 lakh.
Computation Table
| Item | Amount |
|---|---|
| Solar Plant Cost | Rs 8 crore |
| Dismantling Provision Added | Rs 0.50 crore |
| Total Initial Cost | Rs 8.50 crore |
Annual depreciation = Rs 8.50 crore / twenty years = Rs 42.50 lakh per annum.
Journal Entry
Dr PPE, Solar Plant
Rs 8.50 crore
Cr Bank
Rs 8 crore
Cr Provision for Dismantling
Rs 0.50 crore
The dismantling liability accrues interest annually until settlement per AS 29 requirements.
Disclosure Requirements under AS 10
Disclosures under AS 10 and Schedule III to the Companies Act, 2013 ensure that users of financial statements understand the measurement, movement, and security status of property, plant and equipment (PPE). Transparent disclosures allow auditors, investors, and regulators to assess asset quality and compliance with statutory requirements.
| Item | Requirement | Para Reference |
|---|---|---|
| Measurement bases used for determining gross carrying amount | Disclose for each class of PPE | Para 90 |
| Depreciation method used | Disclose by class (straight-line, WDV, units of production) | Para 90 |
| Useful lives or depreciation rates used | Compare to Schedule II rates if different | Para 90 |
| Gross carrying amount and accumulated depreciation at beginning and end of period | Reconciliation of movements | Para 90 |
| Reconciliation showing additions, disposals, acquisitions, depreciation, impairment losses, and other movements | Detailed movement schedule | Para 90 |
| Restrictions on title and PPE pledged as security | Disclose with carrying amounts | Para 91 |
| Capital work-in-progress | Disclose CWIP additions and capitalisation | Schedule III |
| Capital commitments not provided for | Disclose contractual commitments for acquisition of PPE | Para 91 |
| Revaluation details (if revaluation model used) | Date, valuer credentials, methods and assumptions, revaluation surplus movement | Para 92-93 |
Auditors must verify these disclosures under SA 700 to ensure the financial statements present a true and fair view.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Continuing to use composite asset depreciation on assets where component-wise depreciation became mandatory from FY 2017-18.
- Incorrect capitalisation of indirect overheads not directly attributable to bringing the asset to working condition.
- Failure to recognise dismantling and site restoration provision under AS 29 with corresponding capitalisation in PPE.
- Inconsistent application of Schedule II useful lives without technical justification disclosure.
- Treating major repairs and overhauls that extend useful life as expense rather than capitalising under the component approach.
- Failure to derecognise replaced components when replacing them with new ones (double-counting in PPE).
Industry application notes
Power generation: Generators, turbines, transmission assets, and civil structures have very different useful lives. The component approach materially changes depreciation profiles. Many plants needed re-running of fixed asset registers when AS 10 was revised in 2017.
Hospitality: Hotel buildings have multiple components: structure (40-50 years), interiors (10-15 years), fixtures (5-7 years). Refurbishment cycles align with the interior and fixture components rather than the structure.
SME manufacturing: Smaller manufacturers often struggle with component identification. Materiality threshold (typically 5-10% of asset cost) is used to limit components requiring separate depreciation; below this threshold, costs are aggregated.
AS 10 vs Ind AS 16 vs IFRS: Key Differences
The table below compares key aspects of AS 10 (Indian GAAP), Ind AS 16 (Indian converged standard), and IAS 16 (IFRS global standard):
| Aspect | AS | Ind AS | IFRS |
|---|---|---|---|
| Component approach | Mandatory under revised AS 10 (FY 2017-18 onwards) | Mandatory under Ind AS 16 | Mandatory under IAS 16 |
| Subsequent measurement | Cost model or revaluation model | Cost model or revaluation model | Cost or revaluation model |
| Bearer plants | Capitalised as PPE | Capitalised as PPE under Ind AS 16 | Capitalised as PPE under IAS 16 |
| Useful life basis | Schedule II rates with technical justification for differences | Useful life based on entity-specific factors; Schedule II is rebuttable | Entity-specific useful life |
| Decommissioning costs | Capitalised initially | Capitalised initially | Capitalised initially |
| Investment property | Treated as PPE under AS 10 | Separate standard Ind AS 40 | Separate standard IAS 40 |
India’s carve-outs retain Schedule II minimum useful life guidance for companies applying AS 10. Ind AS 16 allows more flexibility based on entity-specific circumstances but expects technical justification if deviating from Schedule II. Under IFRS/IAS 16 there is no reference to statutory useful lives, management estimates govern all cases.
Latest Amendments to AS 10 (FY 2026-27)
No amendments have been notified to AS 10 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [Ind AS 16](/ind-as-16-property-plant-and-equipment/), Equivalent PPE standard for Ind AS-applicable companies; substantively similar to revised AS 10.
- [AS 16](/as-16-borrowing-costs/), Borrowing-cost capitalisation for qualifying PPE under construction.
- [AS 28](/as-28-impairment-of-assets/), Impairment testing of PPE when indicators exist.
- [AS 29](/as-29-provisions-contingent-liabilities/), Provision for dismantling and site restoration costs at PPE recognition.
- [AS 6](/as-6-depreciation-accounting/), Original depreciation standard, now superseded by revised AS 10.
Need Help with AS 10 Compliance?
Patron Accounting LLP supports Indian companies in achieving full compliance with AS 10 Property, Plant and Equipment. Our team brings practical experience across sectors, manufacturing, hospitality, power, and delivers robust solutions tailored to your business needs.
Our services include:
- Statutory Audit
- Financial Reporting & Schedule III
- Disclosure Review
- Ind AS Advisory
Schedule a 30-minute consultation with our Ind AS team, Pune · Mumbai · Delhi · Gurugram.
Frequently Asked Questions (FAQs)
All Level I, Level II, and Level III enterprises preparing financial statements under Indian Accounting Standards notified by the Ministry of Corporate Affairs must apply revised AS 10 unless they are required to follow Ind AS. Listed companies typically follow Ind AS 16 instead.
Revised AS 10 requires separate identification and depreciation of significant parts (“components”) within an item of property, plant or equipment if their cost is material relative to total asset value or their useful lives differ substantially from the main asset.
Companies must use minimum useful lives specified in Schedule II unless a different estimate is technically justified. If a company uses a different rate or useful life than prescribed by Schedule II, it must disclose this fact along with supporting reasons in its financial statements.
While both standards mandate component-wise depreciation and allow cost or revaluation models for subsequent measurement, Ind AS 16 permits greater flexibility in estimating useful lives based on entity-specific factors. Under Ind AS 16 investment property falls outside its scope; it is covered by Ind AS 40 instead.
Major repairs or overhauls that extend an asset’s useful life must be capitalised as a new component if they meet recognition criteria. The replaced part should be derecognised from the books immediately upon replacement so double-counting does not occur.
If a company applies the revaluation model under AS 10 it must disclose date of last valuation, credentials of valuer(s), methods and assumptions used in valuation process, movement in revaluation surplus during the period and how fair value was determined.
Dismantling or site restoration costs expected at end-of-useful-life are included in initial cost of PPE if there is a present obligation. A corresponding provision is created per [AS 29], which accrues interest over time until settlement at end-of-life.
On transition from original AS 6/old AS 10 to revised AS 10 companies must identify significant components within existing assets for separate depreciation prospectively from date of adoption, typically FY 2017-18 onwards, and adjust fixed asset registers accordingly.
Under Indian GAAP investment property is generally treated within scope of revised AS 10 unless specific industry guidance applies. Under Ind AS framework such assets fall within scope of Ind AS 40 Investment Property instead.
Auditors commonly flag failure to implement component-wise depreciation post-FY 2017-18 amendment effective date; continuing composite method without justification; inconsistent application across classes; inadequate documentation supporting materiality thresholds; or lack of technical rationale where company departs from Schedule II rates.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Accounting Standards) Amendment Rules, 2016, reaffirmed in Companies (Accounting Standards) Rules, 2021) · IFRS Foundation