Chapter 5 - Non-current Assets

Question 1

How does IAS 16, Property, Plant and Equipment define PPE?

Answer 1

Tangible items which are used to produce or supply goods, for rental, or for administrative purposes over more than one period

Question 2

How should PPE be measured?

Answer 2

Cost or revaluation method

Question 3

How can grants be measured?

Answer 3

Revenue grants or capital grants

Question 4

How should revenue grants be accounted for?

Answer 4

Relate to operating costs, match in P/L with related costs

Question 5

How should capital grants be accounted for?

Answer 5

Related to asset purchases, match in P/L with related Dep’n

Question 6

What are the two methods of capital grants?

Answer 6

Deferred income approach and netting off approach

Question 7

How should the deferred income approach?

Answer 7

Record grant as deferred income

Question 8

How should the netting off approach be accounted for?

Answer 8

Deduct grant from cost of asset

Question 9

What is a qualifying asset?

Answer 9

One that takes substantial time to get ready

Question 10

If general borrowings, how should this be accounted for?

Answer 10

Using weighted average rate

Question 11

What is the definition of investment property under IAS 40?

Answer 11

Land or buildings held for rental and/or capital appreciation , or is is land held for undecided use

Question 12

How should investment property be recognised?

Answer 12

Recognise initially at cost

Question 13

How can investment property be recorded?

Answer 13

Cost model and fair value model

Question 14

How does investment property recorded using the cost model accounted for?

Answer 14

Depreciate over useful life/profit or loss on disposal in P&L

Question 15

How does investment property recorded using the fair value model accounted for?

Answer 15

No depreciation, revaluation gains/losses recorded in the profit and loss

Question 16

What is the definition of intangible assets?

Answer 16

Intangible assets are identifiable non-monetary assets without physical substance

Question 17

How should intangible assets be recorded?

Answer 17

Initially at cost and then using the cost model and revaluation model

Question 18

How does intangible assets recognised using the cost model get recorded?

Answer 18

Amortise over useful life and then profit or loss on disposal in P/L

Question 19

How does intangible assets recognised using the revaluation model get recorded?

Answer 19

Amortise over useful life, revaluation gains in OCI

Question 20

When is the revaluation method for intangible assets allowed to be used?

Answer 20

Only allowed if an active market exists

Question 21

What gets included when recording intangible assets?

Answer 21

Cost = Purchase price + direct costs

Question 22

What are all the conditions of capitalising development expenditure?

Answer 22

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

Question 23

When should an impairment review be carried out?

Answer 23

Annually for certain assets, where there are indications of impairment for other assets

Question 24

What are indications of impairment?

Answer 24

A decline in the market value of the asset, adverse changes to the environment and asset obsolescence, damage or idleness

Question 25

How do you calculate the recoverable amount?

Answer 25

Higher of value in use or fair value less costs to sell

Question 26

How to calculate impairment for cash generating units?

Answer 26

Allocate impairment to goodwill then to other assets in proportion to carrying amount

Question 27

How does IFRS 5 state an asset is held for sale?

Answer 27

An asset held for sale is one where the carrying amount will be recovered primarily from a sales transaction