Scope and Definition of Public Sector PPE
Under IPSAS 17 (Property, Plant, and Equipment) and GASB Statement 34, Property, Plant, and Equipment (PPE) are tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and are expected to be used during more than one reporting period. In the public sector, this encompasses standard administrative buildings, vehicles, and office technology, alongside highly specialized public assets like military defense equipment and state research laboratories.
The Dual Measurement Models for Subsequent Valuation
Once an item of PPE is initially recognized at cost (including purchase price and directly attributable import duties or site-preparation costs), standard setters permit a choice between two distinct accounting models:
  • The Cost Model: The asset is carried at its historical cost less any accumulated depreciation and subsequent accumulated impairment losses. This is the dominant choice for general administrative assets due to its simplicity and objectivity.
  • The Revaluation Model: The asset is carried at a revalued amount, which is its fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment losses. Revaluations must be performed regularly to ensure that the carrying amount does not differ materially from its current fair value at the reporting date. 

Accounting for Revaluation Surpluses and Deficits
When a government chooses the revaluation model, value changes are tracked through specialized equity channels rather than impacting the current year’s operational bottom line:
                  ┌──► Revaluation Increase ──► Credit to "Revaluation Surplus" (Accumulated in Net Assets/Equity)
                  │
Subsequent Asset  │
Valuation Change  │
                  └──► Revaluation Decrease ──► Debit to Expense (Unless reversing a previous Revaluation Surplus)

If an asset’s value increases, the credit is entered into a Revaluation Surplus account within Net Assets/Equity. It bypasses the Statement of Financial Performance to prevent governments from inflating their operating results via paper gains on real estate. If the asset’s value decreases, the drop is recorded as an expense, unless it directly reverses a previous revaluation surplus on that same asset, in which case it is debited against equity.
 
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