PPE and Inventory Accounting — Registers, Cost and Impairment

A physical register and accounting schedule should reconcile, but physical quantity does not establish valuation. A fully depreciated asset may still exist, while an obsolete item may remain in the count but require a write-down.

Assume inventory cost NPR 500,000 and a reviewed recoverable/net-realisation amount NPR 430,000 under the applicable rule. A NPR 70,000 write-down is considered in the accounting working. Its income-tax deduction is analysed separately. A machine costing NPR 1,000,000 with assumed residual value NPR 100,000 and a reviewed five-year straight-line life has annual depreciation NPR 180,000 before timing and other adjustments. That amount is not automatically its tax deduction.

Investigate count differences, goods in transit, consignment goods, damaged stock and cut-off. For PPE, reconcile additions to invoices, disposals to approvals and proceeds, and project transfers to commissioning evidence. Review useful lives and impairment indicators under the chosen framework. Keep estimate changes distinguishable from errors.

Approve write-downs and disposals without allowing approval to substitute for measurement evidence. Tie schedules to ledger and notes. A current framework and applicable ASB carve-outs must be checked before the final statements are approved; this article supplies a practical preparation workflow rather than one universal policy for every entity.

An item of property, plant and equipment needs an identifiable asset and a supported cost. Determine the purchase price and eligible costs of bringing it to the location and condition for its intended use under the reporting framework. Recoverable taxes, financing charges and unusual losses should not be added indiscriminately to an asset balance.

Later expenditure requires a separate assessment. Replacing an important component can differ from ordinary servicing. A large invoice does not make work capital merely because it is expensive. The working should explain the nature of the benefit, the recognition criterion and whether a replaced component needs removal from the asset record. Keep the assessment connected to the physical asset and supporting invoice.

Useful life, residual value and the depreciation method should reflect the asset's expected use under the selected framework. Review estimates when evidence changes. Tax pool rates answer a different question and should remain in a separate schedule, with any difference reconciled to the tax computation.

A Nepal hotel replaces a major air-conditioning component while continuing to use the remaining system. The reporting team identifies the old component, the new cost and the resulting asset record rather than adding the whole payment to a generic “repairs” account or retaining both components indefinitely. Physical inspection and maintenance records support the accounting conclusion.

Reconcile purchase, production, issue, sale and closing stock. Investigate negative quantities, slow movement, damage and obsolete items. The applicable framework determines cost methods and impairment or net-realisation assessment. A physical count establishes existence and quantity at the count date; it does not alone establish the correct cost or saleability.

Suppose imported stock cost NPR 500,000, but damage reduces the supported recoverable selling amount after relevant costs to NPR 350,000. The team examines the condition, expected sale proceeds and framework before recognising the resulting adjustment. It also assesses whether a supplier claim, insurance recovery or customs matter is a separate balance. One unexplained net figure would conceal several different accounting questions.