Chapter 9: Plant Assets etc. Flashcards
Name the four characteristics of
Plant Assets
- 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”
Determining the Cost of Plant Assets
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
Constructing a Building:
Interest Cost
- 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
Annual Recurring Expenditures
- e.g. vehicle license, accident insurance etc.
- These cost are treated as EXPENSES and not als Anschaffungskosten
Taxes
Are part of the Cost !!!!
Name the three Depreciatons Methods
- Straight Line
- Units of Activity Method
- Declining Balance Method
Straight Line-Method
Formel
- Expense SAME AMOUNT for each year
Units of Activity Method
Formel
- Estimate the TOTAL UNITS OF ACITIVTY to calculate the deprecation cost per unit
- Expenses varies based on units of activity
Declining Balance
Formel
- Accelerated Method
- Decreasing Annual Depreciaton Expense over the assets useful life
- ACHTUNG: Rate applied to BOOK VALUE not NET BOOK VALUE
Component Depreciation
- 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
What is the purpose of choosing for a higher TAX INCOME
- Maybe losses from PRIOR Year that are ONLY applicable for 5 Years
- Change of Tax Rate in the next year
Revising Periodic Depreciation
UND FORMEL
- No restatment of PRIOR YEARS depreciation expense
- ONLY CHANGE CURRENT & FUTURE YEARS
REVALUATION of Plant Assets under IFRS
- 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
Revaluation of Plant Assets under IFRS
Buchung unter GAIN Situation
Revaluation of Plant Assets under IFRS
Loss Situation
Expenditures Duing Useful Life
- Ordinary Reparis
- Additions and Improvements
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
Sale of Plant Assets
- Gain Situation
- Loss Situation
ACHTUNG: Accumulated Depreciation und Asset müssen VOLL AUSGEBUCHT werden
What is a reason for changing it from “Ordinary Repairs” to Additions and Improvements”
- Tax Burden
- Change of EBIT and EBITDA
Depletion
- 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
Acquisition Cost of an extractable natural resource:
- price nedeed to acquire the resource and
- prepare it for its intended use
Depletion Method:
Units of Activt Method
- Generally a function of the units extracted
Extracted Resources that have not been sold are reported as ?
- Inventory in the current Asset Section
Intangible Assets
- Limited-Life Intangibles:
- Amortize to expens
- Indefinite-Life Intangibles:
- No amortization
ACHTUNG: KEIN Contra Asset anbuchen bei der Abschreibung, sondern direkt dass Asset abschreiben
Abschreibung über ?
- Patents
- Copyrights
- Trademarks and Trade Names
- Franchise and License
- Goodwill
- Patents:
- Amoritze over its LEGAL LIFE or its useful life
- whichever is shorter
- Copyright:
* Over its Useful life - Trademarks and Trade Names:
* NO Amortization - Franchise and License:
- with limited Life: over its useful life
- with an indefinite life: no amortization
- Goodwill:
* Not Amoritzed
