IAS 16 covers how businesses account for long-term physical assets like equipment and buildings. This guide explains cost, depreciation and revaluation.
Published July 2026 · Updated July 2026
IAS 16, Property, Plant and Equipment, sets out how to account for tangible long-term assets, machinery, vehicles, fixtures, buildings, that a business uses over several years.
An asset is first recorded at cost, which includes the purchase price plus the costs of getting it ready to use, such as delivery and installation.
Because the asset is used up over time, its cost is spread across its useful life as depreciation, an expense each period. This matches the cost to the years that benefit from the asset.
A business can keep assets at cost less depreciation, or choose the revaluation model, carrying them at fair value with regular revaluations. Most small businesses use the simpler cost model.
You buy a machine for £12,000 with a 5-year useful life:
The way an asset's cost is spread over the years it is used, recognised as an expense each period rather than all at once.
No. Depreciation is an accounting expense; capital allowances are the tax version HMRC allows. They are calculated differently.
Full IFRS reporters apply IAS 16. UK GAAP (FRS 102/105) has equivalent rules for fixed assets and depreciation.
Source: IFRS Foundation ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.