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Question 1

Do all land and buildings fall within IAS 16

Answer 1

No

Question 2

How are intangible assets initially measured

Answer 2

At cost

Question 3

What is cost

Answer 3

Gross concept

Question 4

How is cost determined for inventories

Answer 4

Specific measurements unless inventories are interchangeable. Otherwise FIFO or weighted average. LIFO not allowed 

Question 5

How is inventory subsequently measured

Answer 5

Lower of cost and net realisable value

Question 6

What are subsequent measurements for non-current assets

Answer 6

After initial recognition items of PPE are measured using either cost model or revaluation model

Question 7

What is the cost model 

Answer 7

Cost less accumulated depreciation and impairment

Question 8

What is the revaluation model

Answer 8

Fair value

Question 9

How is PPE revaluated - consistency

Answer 9

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

Question 10

How often is PPE reevaluated - up-to-date the values

Answer 10

frequently so carrying amount doesn’t differ much from fair value at reporting date

Question 11

What is revaluation of gains and losses

Answer 11

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

Question 12

What is PPE revaluation decrements (losses) 

Answer 12

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

Question 13

Where do Revaluation gains and losses IAS 40 go to

Answer 13

profit or loss

Question 14

What is the derecognition of PPE

Answer 14

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

Question 15

What is depreciation

Answer 15

Depreciable amount of an asset shall be allocated on a systematic basis over its useful life

Question 16

Are all assets under IAS 16 depreciated

Answer 16

No not land

Question 17

What depreciation method should be used

Answer 17

It shall reflect pattern in which assets future economic benefits are expected to be consumed by entity accountants usually use straight line

Question 18

How is depreciation calculated 

Answer 18

Cost of asset less residual value

Question 19

What is revaluation depreciation expense

Answer 19

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. 

Question 20

Under IAS 40 is there depreciation when fair value is used

Answer 20

No

Question 21

What is revaluation depreciation seen as under IAS 16

Answer 21

Replacing original cost with current cost

Question 22

What is impairment about

Answer 22

Physical or economic damage to assets

Question 23

What does IAS 36 require to take account of damage (impairment)

Answer 23

Assess at its reporting date whether there is any indication of impairment and an asset is carried at no more than its recoverable amount

Question 24

What are the indicators of impairment

Answer 24

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 

Question 25

What is the recoverable amount of impairment 

Answer 25

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

Question 26

What is a reversal of impairment

Answer 26

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

Question 27

When are PPE reevaluations needed

Answer 27

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

Question 28

What is revaluation depreciation seen as under IAS 40

Answer 28

Departing from cost model