Chapter 2 - Tangible Non-current Assets Flashcards
What are asset items?
Expenditure on non-current assets or on the subsequent improvement of non-current assets. Recorded on SFP
What are expense items?
All other expenditure within the business that is not an asset item.
Property plant and equipment should be recognised as an asset when?
A probable flow of future economic benefit
A reliable measure of cost
Property plant and equipment should initially be measured at what?
Cost
- purchase price
- delivery and installation
- professional fees
- end of life costs - dismantling
Subsequent expenditure should only be capitalised if what?
- enhances the assets economic benefit
- relates to an overhaul or major safety inspection
- replaces a component of an asset that has 2 or more significant parts
If subsequent expenditure is not capitalised where should it go?
Expensed to SPL
What is depreciation?
The systematic allocation of the depreciation amount of an asset over its useful lofe
What are the methods of depreciation?
Straight line
Reducing balance
Machine hours
What is residual value?
Amount that the asset is expected to be sold for at the end of its useful life
How do you calculate the straight line method?
Cost - residual value / useful economic life
How do we calculate the reducing balance method or diminishing method?
Depreciation expense = CV x %
How do we record Depn?
Dr depreciation expense (SPL)
Cr accumulated depreciation (SFP)
What is the units of production basis?
Estimated how much the business actually used the asset
What is the formula for units of production basis?
(Cost - residual value) x (current years activity) / (expected activity in useful life)
What are the types of activity for units of production basis?
No of operations
No of units produced
No of hours operated
