Assets Flashcards
Asset definition
A resource: -controlled by the entity -arose from a past event -future economic benefits probale -can be measured reliably: cost FV PV future cash flows
Initial recognition
IAS 16
at cost
capitalise:
- cost of asset
- directly attributable costs to bring asset into working use (int on loan to construct) (capitalise from when expenditure incurred)
- cost to dismantle and restore land (provisions)
Expense
- Costs which do not meet definition (repairs, planned future expenditure)
- non directly attributable costs
Subsequent measurement (cost model)
Asset depreciated over UEL
Each separate component depreciated over its uel
CA = cost - acc dep
Subsequent measurement (revaluation)
Asset depreciated over UEL when ready for use
Asset revalued to FV
if FV>CA - DR PPE CA, CR OCI
depr in later years will be higher as PPE now has higher CA :
- addn dep cause lower profits
- profits transfered to RE, RE will be lower due to reval
- OCI gains transferred to Reval reserve, higher RR
- can choose to trsfer additional dep from RR to RE (DR RR , CR RE)
- Assets must be revalued frequently enough so that FV and CA do not materially differ
PPE carying amount on SFP= FV-acc dep
Impairment
IAS 36
indicators- fall in FV, Physical damage, market change
impairment expense if - Recoverable amount< CA
higher of :
FV - cost to sell
Value in use- PV future cash flows from asset (max 5 years, exclude tax + financing costs)
Assets held for sale
1-Asset available for sale in present condition
2-Sale highly probable within 12m
3-management committed to sale
4-Actively advertising asset at reasonable price
5-Unlikely that plan will change
impairment expense if: FV - costs to sell
discontinued operations
- division or subsidiary which has already been disposed of/held for sale
- separate geographical area of business/separate market
- must be able to separate financial info from rest of business
P&L results presented as a single ‘profit from discontinued operations’ line
includes P&L impairment expense from assets classified as AHFS
disposal
IAS 16
-Dr cash (proceeds received)
-CR CA (asset no longer controlled so derecognise on sofp)
-CR/DR Profit or loss on disposal
cash received>value of asset on sfp=profit
cash received< value of asset on sofp=loss
any amounts in RR transferred to RE (DR RR, CR RE)
Intangible assets definition
same definition as asset- but must be separable (sold without selling business) or legal rights over asset
Initial recognition IA
capitalise as part of IA asset:
- Cost of asset purchased from external party
- directly attributable costs(inc int on loans to develop asset and depr on PPE used to develop asset)
development costs (costs of developing internal IA) only if:
- future economic benefits probable
- technically feasible to complete IA
- Intention to complete IA
- Ability to use or sell IA
- can be measured reliably
Expense to P&L:
- costs not meeting the asset definition:
- staff costs because they are not controlled by business
- research costs because future economic benefits are not probable
- Internally developed goodwill, brands and customer lists can’t be measured reliably
- costs not directly attributable to bringing the asset into working use
IA subsequent measurement
cost model:
asset amortized over uel when ready for use
- UEL : legal right to use;expected sales period; technological change
- UEL/amort method reviewed annualy
revaluation model:
- can only use if active market for the asset, doesn’t apply to most as most are unique
- Residual value is usually zero for the same reason
Inventories
goods sold by companies and materials used for those goods
IAS 2 initial recognition: -cost goods/materials -directly attributable costs: delivery materials Labour
variable production over heads ;
per unit amount= overheads/actual units produced
fixed prod ovh= overheads/ normal volume produced
expense:
non directly attributable costs:
storage, selling distribution
inventories subsequent measurement + disposal
sub:
lower of cost and NRV
impairment if- cost>NRV
cr inventory, DR P&L
Disposal:
when inventory sold to customer
allocate items of inventory based on FIFO or WAC
