Chapter 6: Tangible non-current assets

Question 1

IAS 16 - PPE

Answer 1

PPE

Expected to be used for more than one accounting period

held for use in the production or supply of goods or services, for rental to others, or for admin purposes.

Question 2

Recognition

Answer 2

meets the definition of an asset

it is probable that the future economic benefits associated with the item will flow to the entity

the cost of the item can be measured reliably

Question 3

directly attributable costs

Answer 3

all costs associated with getting the asset to its location and into a condition where its ready for use

such as :
salaries paid to employees for constructing the asset
cost of site preparation
delivery and handling costs
installation and assembly costs
costs of testing the asset to ensure it is functioning correctly
professional fees
non refundable taxes and other acquisitions

Question 4

non - directly attributable costs

Answer 4

costs of opening the facility
admin or general overheads
costs of advertising
costs of conducting business
initial operating losses

Question 5

Subsequent expenditure

Answer 5

Expenses - repairs or maintenance to put the asset back to its original condition

enhancement - any expenditure which results in an enhancement to the performance of the asset

Question 6

component asset

Answer 6

splitting the asset into two assets

Question 7

Measurement post acquisition

Answer 7

Cost model - cost less accumulated depreciation

revaluation model - fair value less any subsequent accumulated depreciation

frequency of valuation - not IAS16 specified , made with sufficient frequency that the carrying amount of the asset doesn’t differ materially from its actual fair value

Question 8

debit credit revaluation gain

Answer 8

Debit - asset
Debit - accumulated depreciation (to clear)
Credit - Revaluation surplus

Question 9

debit credit revaluation loss

Answer 9

Debit - revaluation surplus (value up to the balance in the surplus account if any)

Debit - profit or loss

Debit - accumulated depreciation

Credit - non current asset

Question 10

useful life depreciation

Answer 10

(carrying amount - residual value) / remaining useful life

Question 11

initial measurement

Answer 11

Initially measured at cost
including all directly attributable costs