Chapter 6 - Tangible Non-current Assets

Question 1

What does IAS 16 cover?

Answer 1

Property, Plant & Equipment

Covers any tangible assets that are:

• Held for use
• Expected to be used for more than one period

Question 2

How should all assets be measured by initially?

Answer 2

At cost

Cost is the purchase price plus all directly attributable costs

Question 3

Examples of directly attributable costs

Answer 3

Salaries for constructing the asset

Cost of site prep

Delivery

Installation and assembly

Testing the asset

Professional fees

Non refundable taxes

Question 4

Things that should not be included in the cost of an asset

Answer 4

Costs of opening the facility

Admin costs

Advertising

Operating losses

Training

Question 5

What are the two types of cost for subsequent expenditure?

Answer 5

Expenses - repairs, redecoration, maintenance etc should be added to P&L

Enhancement - upgrading a machine etc should be added to the cost of the asset

Question 6

What are the two types of measurement post acquisition?

Answer 6

Cost model - Asset is carried at cost less depreciation

Revaluation model - Asset is carried at fair value less any subsequent accumulated depreciation

Question 7

Formula if the rate of depreciation or the useful life is changed?

Answer 7

NBV - Residual Value / Remaining useful life