Chapter 5 - Non-current Assets Flashcards
How does IAS 16, Property, Plant and Equipment define PPE?
Tangible items which are used to produce or supply goods, for rental, or for administrative purposes over more than one period
How should PPE be measured?
Cost or revaluation method
How can grants be measured?
Revenue grants or capital grants
How should revenue grants be accounted for?
Relate to operating costs, match in P/L with related costs
How should capital grants be accounted for?
Related to asset purchases, match in P/L with related Dep’n
What are the two methods of capital grants?
Deferred income approach and netting off approach
How should the deferred income approach?
Record grant as deferred income
How should the netting off approach be accounted for?
Deduct grant from cost of asset
What is a qualifying asset?
One that takes substantial time to get ready
If general borrowings, how should this be accounted for?
Using weighted average rate
What is the definition of investment property under IAS 40?
Land or buildings held for rental and/or capital appreciation , or is is land held for undecided use
How should investment property be recognised?
Recognise initially at cost
How can investment property be recorded?
Cost model and fair value model
How does investment property recorded using the cost model accounted for?
Depreciate over useful life/profit or loss on disposal in P&L
How does investment property recorded using the fair value model accounted for?
No depreciation, revaluation gains/losses recorded in the profit and loss
What is the definition of intangible assets?
Intangible assets are identifiable non-monetary assets without physical substance
How should intangible assets be recorded?
Initially at cost and then using the cost model and revaluation model
How does intangible assets recognised using the cost model get recorded?
Amortise over useful life and then profit or loss on disposal in P/L
How does intangible assets recognised using the revaluation model get recorded?
Amortise over useful life, revaluation gains in OCI
When is the revaluation method for intangible assets allowed to be used?
Only allowed if an active market exists
What gets included when recording intangible assets?
Cost = Purchase price + direct costs
What are all the conditions of capitalising development expenditure?
P - Probable economic benefits
I - Intention to complete + use/sell asset
R - Resource available to complete the asset
A - Asset can be sold
T - Technically feasible
E - Expenditure can be measured reliably
When should an impairment review be carried out?
Annually for certain assets, where there are indications of impairment for other assets
What are indications of impairment?
A decline in the market value of the asset, adverse changes to the environment and asset obsolescence, damage or idleness
How do you calculate the recoverable amount?
Higher of value in use or fair value less costs to sell
How to calculate impairment for cash generating units?
Allocate impairment to goodwill then to other assets in proportion to carrying amount
How does IFRS 5 state an asset is held for sale?
An asset held for sale is one where the carrying amount will be recovered primarily from a sales transaction
