Class Test Flashcards
IAS 16
PPE
To be tangible asset must (2)
- Be used within business
- Held for more than 12 months
Can settlement discount be capitalised?
No
IAS 37
Costs relating to dismantling assets
Straight line depreciation
Cost - residual value / UEL OR cost x %
Reducing balance depreciation
NBV x %
Double entry depreciations
DR Depreciation expense
CR Accumulated depreciation
Subsequent expenditure expensed if improves: (3)
- UEL
- Capacity
- Quality
Change in depreciation method/ UEL steps
1) Calculate NBV
2) Apply the change
Revaluation double entry (Step 1)
DR NCA Cost
DR Accumulated Depreciation
CR Revaluation Reserve
NCA cost revaluation =
Difference between revalued amount and original cost
New depreciation expense revaluation (Step 2)
Revalued amount / Remaining UEL
Annual reserve transfer revaluation (Step 3)
New depreciation expense X
Less old depreciation (X)
Excess depreciation = X
Double entry annual reserve transfer revaluation
DR Revaluation reserve
CR Retained earnings
IAS 38
Intangible assets
Intangible asset is..
Not physical substance, but something that owned by company and generates cash. Must be internally generated
Goodwill..
Not internally generated > arises from business combinations
Research costs
Expensed in the P/L
Can intangibles be revalued?
Only if active market exists
Development expenditure can be capitalised if meets critera:
P > Probable I > Intention to complete R > Resources A > Ability T > Technical resources E > Expenditure measured reliably
Amortisation commences on intangibles
Once brought into use, NOT during development
IAS 36
Impairment of assets
What is impairment?
When carrying value exceeds recoverable amount
Recoverable amount =
Higher of:
Fair value less selling costs
OR
Value in use
Value in use =
Future cash flows derived from an asset
Double entry for impairment
DR Impairment expense > P/L
CR Carrying Value of Asset > SFP
Impairment of previously revalued asset
)Carrying value
DR Revaluation Reserve
Depreciated historic cost (CV @ date of revaluation)
DR P/L expense (Impairment)
Recoverable amount
CR Carrying value asset > SFP0
Cash Generating unit
Group of assets that together generate cash
Impairment of CGU
Step 1) Write off goodwill
Step 2) Write off impairment remaining on pro-rata basis of remaining assets
Do not impair asset below
Recoverable amount
If indication of impairment..
Must test for it
IAS 10
Events after reporting date
Events after reporting date =
During period between YE and when accounts signed off
Adjusting events
Existed at YE date therefore included in financial statements
Non-adjusting events
Arose after YE. If material, included in notes of accounts (nature of event and likely cost)
IAS 20
Government grants
Revenue grant
Match against expenditure
Capital grant
On an asset
Capital grant method 1
Offset grant value against value of asset
Capital grant method 2
Deferred income: DR Bank CR Deferred Income > SFP Liability Release grant over life of the asset: Grant / UEL = Amount each year DR Deferred Income CR P/L
Must split deferred income into
Current liability - released in less than 12 months
Non-current liability - released in more than 12 months
