2 Flashcards
Do all land and buildings fall within IAS 16
No
How are intangible assets initially measured
At cost
What is cost
Gross concept
How is cost determined for inventories
Specific measurements unless inventories are interchangeable. Otherwise FIFO or weighted average. LIFO not allowed 
How is inventory subsequently measured
Lower of cost and net realisable value
What are subsequent measurements for non-current assets
After initial recognition items of PPE are measured using either cost model or revaluation model
What is the cost model 
Cost less accumulated depreciation and impairment
What is the revaluation model
Fair value
How is PPE revaluated - consistency
All assets in same class must use same basis and treated same. Change in policy only allowed if new basis is reliable and more relevant. IAS 40 states it’s highly unlikely a change from fair value model to cost model will result in a more relevant presentation
How often is PPE reevaluated - up-to-date the values
frequently so carrying amount doesn’t differ much from fair value at reporting date
What is revaluation of gains and losses
Under IAS 16 increases in carrying amount of an asset are recognised in other comprehensive income and then accumulated in equity as revaluation surplus but decreases go to profit or loss
What is PPE revaluation decrements (losses) 
If an increase reverses a previous loss of same asset that was previously recognised in profit or loss, it’ll be recognised in profit or loss. If there is any credit balance in revaluation surplus relating to that asset, loss is debited to revaluation surplus
Where do Revaluation gains and losses IAS 40 go to
profit or loss
What is the derecognition of PPE
On disposal, an asset must be removed from balance sheet. gain or loss on disposal difference between carrying amount at date of disposal and net disposal proceeds. gain or loss on disposal goes to profit or loss but not as revenue
What is depreciation
Depreciable amount of an asset shall be allocated on a systematic basis over its useful life
Are all assets under IAS 16 depreciated
No not land
What depreciation method should be used
It shall reflect pattern in which assets future economic benefits are expected to be consumed by entity accountants usually use straight line
How is depreciation calculated 
Cost of asset less residual value
What is revaluation depreciation expense
Under IAS 16, when an asset is revalued to fair value, depreciation is still based on the carrying amount So if an asset is revalued upwards depreciation expense increases. 
Under IAS 40 is there depreciation when fair value is used
No
What is revaluation depreciation seen as under IAS 16
Replacing original cost with current cost
What is impairment about
Physical or economic damage to assets
What does IAS 36 require to take account of damage (impairment)
Assess at its reporting date whether there is any indication of impairment and an asset is carried at no more than its recoverable amount
What are the indicators of impairment
External factors include decline in market value more than normal wear and tear and increase in interest rates that reduces RA. Internal factors include obsolescence or physical damage to an asset and changes such as restructuring that could affect value in use of asset 
What is the recoverable amount of impairment 
If impairment is indicated, estimate assets recoverable amount. if recoverable amount is less than carrying amount reduce asset to its recoverable amount. Reduction is an impairment loss recognised as an expense in profit or loss
What is a reversal of impairment
At end of each reporting period assess any indication that a prior impairment no longer exists or has decreased then increase carrying amount to recoverable amount reporting a gain
When are PPE reevaluations needed
each year others may be needed only every 3 to 5 years. Note it’s a level of inflation. if old fair value is used, subsequent depreciation and impairment is deducted
What is revaluation depreciation seen as under IAS 40
Departing from cost model
