Ammendment

Question 1

IAS 16: PPE - proceeds before intended use prohibits an entity from deducting cost of an item of PPE from what?

Answer 1

Sales proceeds. Hence sales proceeds must be treated in statement of profit or loss

Question 2

IAS 16 does not apply to PPE held for sale in accordance to IFRS 5: NCA held for sale and disc operations, biological assets, mineral rights and reserve, investment property under IAS 40 but recognises measurement of exploration and evaluation. True or false?

Answer 2

False. It does not apply to all five criteria

Question 3

IAS 16 allows certain special circumstances such as assets acquired in IFRS 3 and IAS 20

Answer 3

Yes. It does allow for assets under IFRS 3: Business combination and IAS 20: Accounting for govt grants and disclosures of government assistance

Question 3

Spare-part or standby equipments should be classified as PPE or what?

Answer 3

Inventories

Question 4

IAS 16 recognises cost of an asset as purchase price plus what?

Answer 4

Import duties, non-refundable taxes, transportation costs and/or restoration costs

Question 5

Is the cost of a self-constructed asset determined using the same as acquired asset?

Answer 5

Yes

Question 6

Cost of a PPE item should be recognised as an asset if it is probable that future economic benefit would NOT flow into the entity and the cost cannot be measured reliably. True or false

Answer 6

False. It should be probable that an item would bring economic benefit into an entity and its cost can be measured reliably in order to be classified as an asset

Question 7

Under cost model, increase in liability is treated as what?

Answer 7

Dr - Assets
Cr - Liability

Question 8

Under cost model, decrease in liability is treated as what?

Answer 8

Dr - Liability
Cr - Revaluation surplus

Question 9

Under revaluation model, increase in liability is treated as what?

Answer 9

Dr - Profit or loss
Dr - Revaluation surplus(to the extent of a credit balance in the revaluation account
Cr - Liability

Question 10

Under revaluation model, decrease in liability is treated as?

Answer 10

Dr - Liability
Cr - Revaluation surplus
Cr - Profit or loss

Question 11

Does interest constitute a component of an asset?

Answer 11

No it does not

Question 12

The residual value and useful life of an asset shall be reviewed when?

Answer 12

At least at each financial year-end

Question 13

How do you account for depreciation of an asset with significant parts that depreciate differently?

Answer 13

Recognise each significant component as a separate asset and depreciate it over its useful life

Question 14

What factor should be considered in choosing the right depreciation method?

Answer 14

the pattern of consumption of economic benefits and nature of the assets

Question 15

Depreciation does not cease when an asset becomes idle or is retired from active use. True or false?

Answer 15

True. Unless the asset is fully depreciated.