An investigation into the accounting treatment of property, plant and equipment at public higher education institutions in South Africa
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Property, plant and equipment (PPE) constitute a significant portion of total assets of South African public higher education institutions. It is therefore important to keep proper records of the assets and to account for them accurately in the Annual Financial Statements. The aim of this study therefore was to investigate the accounting treatment of property, plant and equipment at public higher education institutions (PHEIs) in South Africa. The following objectives were addressed in this study, to: determine how assets are classified; find out how asset transactions are recorded; and to determine the accounting treatment of assets in terms of cost, depreciation, impairment and disposal. Based on the International Financial Reporting Standards, this study used a mixed-methods research approach to collect data regarding the accounting treatment of PPE at the 23 PHEIs in South Africa. Analysis of results indicated that some institutions: apply different useful lives for the same asset classes; use threshold amounts for the recording and depreciating of assets; use the same value for the recording and depreciating of assets while others record at one value but depreciate at a higher value; and depreciate PPE at different rates as they apply varying useful life to different asset classes. This study also found that while some institutions do impairment testing on an annual basis, others do not, as they do not have a policy in place for impairment testing. Given that the activities or business of educational institutions are similar in nature, this study recommends that PHEIs need to apply consistent recording of assets in terms of their useful life as the useful life of an asset has direct correlation with the surplus or deficit of an institution. This study makes further recommendations regarding the accounting treatment of PPE at PHEIs in South Africa based on the findings of this study. Suggestions for further research are also presented.