Chapter 9 - Non-current assets IAS 16 Flashcards
What needs to be included in an assets cost in accordance with IAS 16?
- purchase price
- Import duties
- Net of discounts and rebates
- Directly attributable costs
- Initial estimate of cost of dismantling and removing item and restoring the site
In accordance with IAS 16, when should subsequent expenditure be capitalised?
- If it improves future economic benefits
- Replaces a component
- Major inspection for faults
What are the steps taken to account for a revaluation?
- Restate asset cost to the revalued amount
- Remove depreciation
- Transfer cost increase to revaluation surplus account
- Recalculate current year depreciation
What are the accounting entries for upwards revaluations of PPE?
Dr - Asset cost (revalued - original)
Dr - Accumulated depreciation
Cr - Revaluation surplus (revalued - previous carrying amount)
What are the accounting entries for downwards revaluations of PPE?
Dr - Revaluation surplus
Dr - P/L
Cr - PPE (cost account)
What are the indicators that an asset has been impaired?
- Decline in market value
- Tech/legal/economic changes
- Physical damage
- Plans to dispose
When does an impairment loss occur?
When the recoverable amount of an asset is below carrying amount
How should an impairment loss be recorded?
As an expense in the P/L
What is a cash generating unit?
Smallest identifiable group of assets that generates independent cash inflows
What does IAS 36 require to be disclosed?
- Amount of impairment losses in P/L
- Amount of reversals in P/L
- Amount of impairment losses directly recognised in equity
- Amount of reversals directly recognised in equity
What is the double entry for calculated depreciation?
Dr - Depreciation expense (SPL)
Cr - Accumulated depreciation (SOFP)
What is the accounting entry for an increase in carrying amount?
Dr - Asset
Cr - Revaluation surplus
What is the accounting entry for a decrease in carrying amount?
Dr - Revaluation surplus
Dr - Expense
Cr - Asset
What is the accounting entry for when the revaluation surplus is transferred to retained earnings?
Dr - Revaluation surplus
Cr - Retained Earnings
If there is no credit on the revaluation surplus account where does a loss go?
Dr - Statement of profit/loss
