ICAI Notifies ‘Implementation Guide on Maintenance of Property, Plant and Equipment (PPE) Register – Best Practices’

Property, Plant, and Equipment (PPE) Register:

A PPE register is a comprehensive documenting fixed assets acquired or constructed by an entity and
capitalized in their accounting records. It maintains and reflect the capitalized cost, accumulated
depreciation and the net book value of each asset, providing a comprehensive overview.
An entity has the option to choose between electronic or physical PPE register. When maintained in
an electronic format, details can be maintained into integrated accounting software, standalone
software or manual records. But reconciliation to the total value of assets as held by the entity and as
reflected in the books and records is essential.
PPE registers constitute Books of Accounts as per the Companies Act, 2013 and compliance with
relevant provisions in necessary. Section 2(13) of the Companies Act, 2013 states that “books of
account” includes records maintained in respect of:
a) all sums of money received and expended by a company and matters in relation to which the
receipts and expenditure take place;
b) all sales and purchases of goods and services by the company; and
c) the assets and liabilities of the company.

Schedule III Disclosure Requirements:

Schedule III of the Companies Act, 2013 outlines the financial reporting framework for companies. It
includes specific disclosure requirements for Property, Plant, and Equipment (PPE) in the financial
statements of companies. The following are the specified disclosure requirements in Schedule III of the
Companies Act, 2013:

• Assets shall be classified under separate headings as Land, Buildings, Plant and Equipment, Furniture and Fixtures, Vehicles, Office equipment, and Others (with specified nature).
• Assets under lease are required to be separately specified under each class of asset.
• Reconciliation of gross and net carrying amounts of assets at the beginning and end of the reporting period, including details on additions, disposals, acquisitions through business combinations, and changes due to revaluation (if exceeding 10% of the net carrying value). Other adjustments, along with related depreciation, impairment losses, and reversals, must be disclosed separately according to Schedule III.
• The company must furnish information on immovable properties not held in its name, excluding leased properties. Details should be provided for properties jointly held with others, specifying the extent of the company’s share.

CARO (Companies Auditor’s Report Order), 2020 Requirements:

CARO, 2020 requires reporting on Property, Plant, and Equipment (PPE) and related items. Auditors
must report on specific aspects of PPE, as mandated by CARO.

CARO, 2020 mandates auditors to report on:

• The maintenance of accurate records, including quantitative details and locations of Property, Plant, and Equipment (PPE) and intangible assets.
• Physical verification of PPE by the management at reasonable intervals, addressing any material discrepancies in the books of accounts.
• Verification of title deeds for immovable properties, ensuring they are in the company’s name; details are to be provided if not.
• Examination of whether the company has revalued its PPE or intangible assets during the year, specifying any change of 10% or more and confirming if the revaluation is based on a Registered Valuer’s assessment.
• Reporting on any initiated or pending proceedings against the company for holding benami property under the Benami Transactions (Prohibition) Act, 1988, and if disclosed appropriately in the financial statements.

Ankit Sawhney, Audit Associate, SW India