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FACC > Chapter 9: Plant Assets etc. > Flashcards

Chapter 9: Plant Assets etc. Flashcards

1
Q

Name the four characteristics of

Plant Assets

A
  • physical substance
  • are used in the operations of the buisness
  • not intended for sale to customers
  • are expected to provide service to the company for a number of years

“PROPERTY, PLANT and EQUIPMENT, and FIXED ASSETS”

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2
Q

Determining the Cost of Plant Assets

A

Historical Cost Principle: At COST

Cost consist of all expendiures

  • to acquire an asset
  • and make it ready for its intended use
    • ​including tax
    • NET amount from removal cost
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3
Q

Constructing a Building:

Interest Cost

A
  • Interest cost incurred to finance the project are included in the cost of the builiding
    • when a significant period of time is required to get the building ready
    • ONLY interest cost during the constrution period
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4
Q

Annual Recurring Expenditures

A
  • e.g. vehicle license, accident insurance etc.
  • These cost are treated as EXPENSES and not als Anschaffungskosten
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5
Q

Taxes

A

Are part of the Cost !!!!

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6
Q

Name the three Depreciatons Methods

A
  1. Straight Line
  2. Units of Activity Method
  3. Declining Balance Method
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7
Q

Straight Line-Method

Formel

A
  • Expense SAME AMOUNT for each year
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8
Q

Units of Activity Method

Formel

A
  • Estimate the TOTAL UNITS OF ACITIVTY to calculate the deprecation cost per unit
  • Expenses varies based on units of activity
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9
Q

Declining Balance

Formel

A
  • Accelerated Method
  • Decreasing Annual Depreciaton Expense over the assets useful life
  • ACHTUNG: Rate applied to BOOK VALUE not NET BOOK VALUE
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10
Q

Component Depreciation

A
  • IFRS requires component depreciation for plant assets
  • Requires that any SIGNIFICANT PARTS of a plant asset that have SIGNIFICANTLY DIFFERENT ESTIMATE USEFUL LIVES should be separately depreciated
  • ACHTUNG: “Significant” in IFRS nicht beschrieben daher MANAGMENT Decision
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11
Q

What is the purpose of choosing for a higher TAX INCOME

A
  • Maybe losses from PRIOR Year that are ONLY applicable for 5 Years
  • Change of Tax Rate in the next year
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12
Q

Revising Periodic Depreciation

UND FORMEL

A
  • No restatment of PRIOR YEARS depreciation expense
  • ONLY CHANGE CURRENT & FUTURE YEARS
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13
Q

REVALUATION of Plant Assets under IFRS

A
  • IFRS allows to revaluate plant assets to fair value at the reporting date
  • If revaluation is used:
    • it must be applied to all assets in a class of assets
    • assets experiencing rapid price changes must be revalued on annnual basis
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14
Q

Revaluation of Plant Assets under IFRS

Buchung unter GAIN Situation

A
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15
Q

Revaluation of Plant Assets under IFRS

Loss Situation

A
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16
Q

Expenditures Duing Useful Life

  1. Ordinary Reparis
  2. Additions and Improvements
A

1. Ordinary Repairs

  • Expenditure to MAINTAIN the operating efficency and productive life of the unit

2. Additions and Improvements

  • costs incurred to INCREASE the operating efficiency, productive capacity, or useful life of a plant asset
17
Q

Sale of Plant Assets

  1. Gain Situation
  2. Loss Situation
A

ACHTUNG: Accumulated Depreciation und Asset müssen VOLL AUSGEBUCHT werden

18
Q

What is a reason for changing it from “Ordinary Repairs” to Additions and Improvements”

A
  • Tax Burden
  • Change of EBIT and EBITDA
19
Q

Depletion

A
  • Generally Use: Units of Activity Method
  • Generally a function of the units extracted
  • Allocation of the cost to expense in a rational an systematic manner over the resource useful life
20
Q

Acquisition Cost of an extractable natural resource:

A
  • price nedeed to acquire the resource and
  • prepare it for its intended use
21
Q

Depletion Method:

Units of Activt Method

A
  • Generally a function of the units extracted
22
Q

Extracted Resources that have not been sold are reported as ?

A
  • Inventory in the current Asset Section
23
Q

Intangible Assets

A
  • Limited-Life Intangibles:
    • Amortize to expens
  • Indefinite-Life Intangibles:
    • No amortization

ACHTUNG: KEIN Contra Asset anbuchen bei der Abschreibung, sondern direkt dass Asset abschreiben

24
Q

Abschreibung über ?

  1. Patents
  2. Copyrights
  3. Trademarks and Trade Names
  4. Franchise and License
  5. Goodwill
A
  1. Patents:
  • Amoritze over its LEGAL LIFE or its useful life
  • whichever is shorter
  1. Copyright:
    * Over its Useful life
  2. Trademarks and Trade Names:
    * NO Amortization
  3. Franchise and License:
  • with limited Life: over its useful life
  • with an indefinite life: no amortization
  1. Goodwill:
    * Not Amoritzed

FACC (10 decks)

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