IAS 16 vs US GAAP: revaluation of property, plant and equipment

For capital-intensive companies, property, plant and equipment is the biggest asset on the balance sheet, so the differences between IAS 16 and US GAAP can move equity and depreciation materially. This guide explains each difference and works through a revaluation example.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

IAS 16 vs US GAAP differs most on measurement: IFRS lets a company carry property, plant and equipment at revalued amounts under the revaluation model, while US GAAP's ASC 360 requires historical cost less depreciation and impairment. IFRS also requires component depreciation of significant parts and annual review of residual values and useful lives, where US GAAP permits but does not require componentisation. Borrowing costs, decommissioning obligations and major inspections are treated differently in detail.

At a glance

Measurement
Cost or revaluation (IFRS) vs cost only (US)
Revaluation gains
Other comprehensive income
Components
Required (IFRS) vs permitted (US)
Residual value and life
Reviewed each year under IFRS
Major inspections
Capitalised under IFRS
US standard
ASC 360
IAS 16 vs US GAAP: revaluation of property, plant and equipmentMeasurement: Cost or revaluation (IFRS) vs cost only (US); Revaluation gains: Other comprehensive income; Components: Required (IFRS) vs permitted (US); Residual value and life: Reviewed each year under IFRS; Major inspections: Capitalised under IFRS; US standard: ASC 360.KEY FACTS AT A GLANCEIAS 16 vs US GAAP: revaluation of property, plantand equipmentMeasurementCost or revaluation(IFRS) vs cost only (US)Revaluation gainsOther comprehensiveincomeComponentsRequired (IFRS) vspermitted (US)Residual value and lifeReviewed each year underIFRSMajor inspectionsCapitalised under IFRSUS standardASC 360Checked against official sourcesTax BakersIAS 16 vs US GAAP: revaluation of property, plant and equipmentMeasurement: Cost or revaluation (IFRS) vs cost only (US); Revaluation gains: Other comprehensive income; Components: Required (IFRS) vs permitted (US); Residual value and life: Reviewed each year under IFRS; Major inspections: Capitalised under IFRS; US standard: ASC 360.KEY FACTS AT A GLANCEIAS 16 vs US GAAP: revaluation ofproperty, plant and equipmentMeasurementCost or revaluation (IFRS) vs cost only (US)Revaluation gainsOther comprehensive incomeComponentsRequired (IFRS) vs permitted (US)Residual value and lifeReviewed each year under IFRSMajor inspectionsCapitalised under IFRSUS standardASC 360Checked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

IAS 16 vs US GAAP: what are the differences?

IAS 16 vs US GAAP at a glanceIAS 16 vs US GAAP at a glanceTOPICIFRSUS GAAPRevaluation modelAllowedNot allowedComponent depreciationRequiredOptionalAnnual residual value reviewRequiredNot requiredCapitalise major inspectionsRequiredPolicy choiceReverse impairmentAllowedNot allowed
Revaluation and componentisation are the differences that move the numbers.
AreaIAS 16US GAAP (ASC 360 and others)
Measurement after recognitionCost model or revaluation model, by class of assetCost model only
Component depreciationRequired for significant parts with different useful livesPermitted, not required
Residual value and useful lifeReviewed at least at each year endReviewed when events indicate a change
Major inspections and overhaulsCapitalised as a component and depreciated to the next inspectionPolicy choice: expense, defer, or treat as a component
Borrowing costsIAS 23: capitalised on qualifying assets, net of investment income on specific borrowingsASC 835-20: interest capitalised, investment income generally not deducted
Decommissioning obligationsIAS 37: current discount rate, remeasured each period, changes adjust the asset (see decommissioning costs)ASC 410: credit-adjusted risk-free rate, measured in layers
ImpairmentIAS 36, reversibleASC 360, two-step test, not reversible

How does the revaluation model work?

A company that chooses the revaluation model for a class of assets, such as land and buildings, carries them at fair value at the revaluation date, less later depreciation and impairment. Revaluations must be regular enough that the carrying amount does not differ materially from fair value. An increase goes to other comprehensive income and builds a revaluation surplus in equity, unless it reverses an earlier decrease recognised in profit; a decrease goes to profit, unless it reverses an earlier surplus.

An example: revaluing a building

A company bought an office building for 1,000,000 five years ago, with a 25-year life. Its carrying amount is 800,000 after depreciation, and its fair value is now 1,200,000.

IFRS, revaluation modelUS GAAP
Carrying amount after revaluation1,200,000800,000
Revaluation surplus in equity400,000None
Annual depreciation over the remaining 20 years60,00040,000

The revaluation raises equity by 400,000 but also raises depreciation by 20,000 a year, so reported profit is lower under IFRS. The surplus may be transferred to retained earnings as the asset is used, but it never passes through profit. Most IFRS companies, in practice, still use the cost model.

A company using the revaluation model must also disclose, for each revalued class, the carrying amount that would have been recognised under the cost model, so readers can still compare it with a US GAAP reporter.

Why does component depreciation matter?

An aircraft's engines, airframe and cabin wear out at different rates. IFRS requires each significant part to be depreciated separately over its own life. US GAAP allows it but many companies depreciate the asset as a whole, which can produce different depreciation patterns and different gains or losses when parts are replaced.

What about investment property?

IFRS has a separate standard, IAS 40, that allows investment property to be measured at fair value through profit or loss. US GAAP has no equivalent for most companies: investment property is treated like other property, at cost.

Where to go next

See IAS 36 vs US GAAP impairment, the revaluation journal entry and the key differences.

Need help applying the standards?

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Questions people ask

Can property, plant and equipment be revalued under US GAAP?

No. US GAAP requires the cost model. IFRS allows the revaluation model by class of asset.

Is component depreciation required under US GAAP?

No, it is permitted. IAS 16 requires significant parts with different useful lives to be depreciated separately.

Where do revaluation gains go under IAS 16?

To other comprehensive income and a revaluation surplus in equity, unless they reverse an earlier loss recognised in profit.

Does US GAAP have an equivalent of IAS 40 investment property?

Not for most companies. Investment property is held at cost like other property.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS Accounting Standards
  2. FASB Accounting Standards Codification

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS vs US GAAPIAS 36 vs ASC 350 and 360: impairment differencesAccounting standardsDebits and credits for standards students: the entries behind each standardAccounting standardsIFRS vs US GAAP: the key differences in one guide

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This guide is general information. It is not tax or legal advice for your situation.