2 Tangible non-current assets Flashcards
What is IAS 16?
IAS 16, Property, Plant and Equipment
What is property, plant and equipment?
Tangible assets held by an entity for more than one accounting period for use in the production or supply of goods or services, for rental or for admin purposes.
When is a item of property, plant and equipment recognised?
It is probable that future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably
What should a PPE should initially be measured at?
Cost
What should be included in PPE cost?
- All costs bringing the assets into working condition
- Initial costs e.g. Delivery costs, installation costs and borrowing costs
- Dismantling costs
- Revenue costs should be written off
When should subsequent expenditure on PPE be capitalised?
- it enhances economic benefits
- relates to overhaul or major inspection if the asset
- replacing a component of a complex asset
What is IAS 20?
Accounting for government grants and disclosure of government assistance
When there is a government grant for revenue, how is this treated?
Gross - present as credit
Net - deduct from income
When there is a government grant for capital, how is this treated?
Net - deduct from asset cost
Deferred credit - how separately
What is IAS 23?
Borrowing costs
What does IAS 23 state about borrowing costs?
Borrowing costs must be capitalised as part of the cost of an asset if the asset is a qualifing asset
What is a qualifying asset?
One which necessarily takes a substantial time to get ready for its intended use or sale
When does capitalisation commence under IAS 23?
Expenditure for the asset is being incurred, and borrowing costs are being incurred and activities that are necessary to prepare the asset for its use or sale
What does capitalisation cease under IAS 23?
When all activities necessary to prepare the qualifying asset for its intended use or sale are complete and there is an unplanned suspension of construction
Under IAS 23, what is the rate of interest to be used?
Actual interest rate where specific funds borrowed or weighted average of general borrowings
What is IAS 40?
Investment Property
What is the definition of investment property under IAS 40?
Investment property is land and/or building held for rental income and/or capital appreciation, rather than for use by the entity or for sale in the ordinary course of business
What two models can IAS 40 use?
Cost mode or fair value model
How is an asset held under IAS 40, cost model?
Initial cost less accumulated depreciation as per IAS 16
How is an asset held under IAS 40, fair value model?
Revalued to fair value each year, any gain or loss taken to profit and loss (not comprehensive income) and no depreciation is charged.
If an asset is revalued from investment property to PPE, under IAS 40, how should this be treated?
Revalue using IAS 40 rules, taking gain to profit and loss
If an asset is revalued from PPE to investment property under IAS 40, how should this be treated?
Revalue using IAS 16 rules taking gain or loss to revaluation surplus or profit and loss as appropriate.
