CR Flashcards
Investment property vs PPE
Assets held to earn rental income/capital appreciation (passive income)
PPE - assets used by the company to produce goods/services and run the business
Single property can be part IP and part PPE eg part rented out
PPE if significant service supplied by company eg cleaning, maintenance
Leased assets always presented as ROU asset
Cost
Cost of asset
Legal
Stamp duty
NOT advertising costs to rent out
Or costs which do not met asset definition eg repairs no, extension yes as more economic benefit in the future
Cost model
Same as PPE
Depr each separate component over UEL when ready for use
UEL, residual value and depr method reviewed annually
FV Model
Do not depr
Revalue to FV each YE
Record increase in P/L - other income
Change of use: PPE -> IP
Eg Used as warehouse, store, head office, now rented out
Cost model - transfer to IP at CA
Reval model - reval prior to transfer to IP, therefore gain through OCI
Change of use: IP -> PPE
Transfer at IP CA
Change of use: inventory (property development business) -> PPE
FV model - Revalue to FV through P/L prior to transfer
Cost model - At CA of inventory
Overseas asset
Cost: HR as it is non-monetary so not retranslated
FV: Closing rate as that is what would be received in £ today
Cash generating unit
Group of assets which make up one cash flow - needs to be tested for impairment as one
Impairment charged to GW then allocated to other assets
If NA method used to calculate GW then GW grossed up to full value
No asset can be impaired to below its own recoverable amount
Impairment: example answer
IAS16 states that an asset is impaired if its RA is less than its CA. RA is higher of FV less CtS and VIU.
At YE, the RA is the VIU of X, this is the PV of future CFs which will be earned by the asset.
The CA is X so the asset is impaired by X
As asset previously revalued up, the impairment is firstly charged to OCI up to amount of the previous revaluation.
Remaining impairment is charged to P/L
