Property Plant and Equipment Intensity and Its Impact on Profitability. Ghanaian listed firms at a glance
Property plant and equipment represents substantial investments particularly to manufacturing, extractive and telecommunication companies. The method of recognition and measurement for such assets can have significant impact on the profitability of the firm. In this article, I examine the intensity of Property Plant and Equipment, the depreciation methodology and the overall impact on profitability. As per IAS 16, PPE can be defined as tangible assets that are held for use in the production or supply of goods and services or for rental to others, or for administrative purposes and are expected to be used during more than one accounting period (more than one year). Ex-ante, a company spends an initial investment to purchase this asset with the hope that, these assets will generate, or facilitate in the generation of income (in the economic sense of it). Once recognized in the statement of financial position, an entity needs to provide for depreciation ie. Spread the cost of the asset...