2D Property, Plant, Equipment Flashcards
Costs included in fixed assets
All expenditures necessary to prepare the assets to be placed in operations (Freight-in, assembly, installation, testing and significant improvements)
Costs included in land
Purchase price, closing costs, getting land ready (clearing, grading, draining), assumption of liens, taxes, etc.
Lump-sum purchases
Take the relative fair value % for each type and multiply it by the total cost to get the apportioned cost for each type.
Carrying value of fixed assets
Cost less depreciation
Straight Line Depreciation
Cost less salvage value
__________
Useful Life
Sum of the years’ digits depreciation
Useful life x (useful life + 1)/2 = sotyd
Cost less salvage value x current year/sotyd = depreciation
Double Declining balance depreciation
(Book Value / useful life) x 2 (x 1.5 for 150% db)
Book value is reduced by prior year’s depreciation expense
Units of production/activity depreciation
(cost less salvage value) x (units used / total estimated units)
Changes to the depreciation estimates are prospective
True
Treatment of repairs
Ordinary = expensed Major = capital expenditure
Reinstallments/rearrangements
Cost is known = reduced accumulated depreciation
Cost is unknown = capitalize
Cost is unknown and not material = expense
Disposing of fixed assets
- Record depreciation through date of disposal
- Record removal of old asset and Accum Depr at date of disposal
- Record cash or other assets received or paid
- Record gain or loss
Depletion of natural resources
Total cost less residual value
_______
Total estimated units available
ASU 360-10
Impairment of PPE
Is impairment more likely than not to have occurred
If no, stop. If yes, perform qualitative tests
Held for use impairment test
Is Carrying value less than Non-discounted future cash flows? If so, measure impairment
Held for use impairment measurement
Carrying value vs Fair Value
Loss goes to discontinued ops if criteria is met, otherwise income from continuing ops.
Held for use impairment JE
Dr - Impairment loss
Cr - Accum Depr
Cannot write up again
Held for sale impairment test
Write down as a loss
Heal for sale impairment measurement
Carrying value vs (fair value less cost to sell (NRV))
Loss goes to discontinued ops if criteria is met, otherwise income from continuing ops.
Held for sale impairment JE
Dr - Impairment loss
Cr - Asset
Do not depreciate. Write up again if it recovers.
IFRS revaluation model JE
Dr - Asset or Accum Depr
Cr - Revaluation surplus - OCI
Disposals: record gain/loss, close to Profit revaluation surplus, close to Retained earnings
IFRS Impairment of PPE
Carrying value > Recoverable amount - impaired
Recoverable amount is greater of:
- Net Selling price (fair value less cost of disposal)
- Value in use (estimated future cash flows from continued use)
IFRS Impairment JE
Cost model
Dr - Depr Exp or Impair loss
Cr - Accum Depr
Revaluation model
Dr - Reval Surplus - OCI
Dr - Impairment loss (plug)
Cr - Asset or Accum Depr
