PPE (property, plant and equipment) is a category of tangible items/ tangible assets that an entity holds for the purpose of using them in the production process or supply of goods/ services (e.g., machinery, tools, etc.), for rental to others (vehicles, machinery, buildings, etc.) or for its own use (administrative use: such as office equipment, furniture, buildings, etc.)

PPE should be derecognized (removed from an entity’s balance sheet, PPE items) either on disposal or when no future economic benefits are expected from the PPE assets (i.e., these assets would reach the end of their economic life).

On disposal, a gain or loss is recognized as the difference between the disposal proceeds and the carrying value of the PPE assets (using the relevant model for measurement of assets: cost model or revaluation model) at the date of disposal. Under the measurement model, these disposal gains/ losses are recycled to the profit and loss statement/ income statement– the sales proceeds are not recognized as revenue.

However, under the revaluation model, any remaining balance in the revaluation reserve relating to the PPE assets, after disposal, will be recycled directly to retained earnings (but not to the income statement).