IAS 16 Flashcards
What are three elements of the standard IAS 16?
- Cost - how much should we recognise
- Depreciation - every asset with the exception of land should be deprecated
- Revaluation
What are the recognition rules for IAS 16?
- We must have control over the asset
- There must be a probable inflow of economic benefits
- We must be able to determine a cost or value
What are Property Plant and Equipment assets?
These are tangible assets - we can touch and feel them.
They are used in the ongoing operation of the business.
Prod of goods, supply serv, rental to others, admin purp and more than 1 account period
How do we initially recognise PPE?
Initially we recognise it at cost
+ List price
- trade discount
* ignore other discount received
+ carriage cost
+ installation cost
+ preproduction testing
+ pv of decommissioning costs
What costs do we include in the cost of an asset?
We are looking for those costs that are DAC direct attributable costs
They are all required to bring the asset to a location and condition where its available for its intended use
What costs are included in the cost of an asset if we were to construct the asset?
+ site costs
+ legal fees
+ stamp duty
+ material costs
+ labour costs
+ direct expenses
+ borrowing costs
+ decommissioning costs
As per Conceptual Framework what is definition of an asset?
An asset is a present economic resource controlled by an entity as a result of a past event
As per the Conceptual Framework what is an economic resource?
An economic resource is a right that has the potential to produce economic benefit
What is the cost PPE?
PPE cost allowing for trade discount but ignoring discount received
How do we treat subsequent costs?
Either revenue or capital expenditure.
We capitalise if enhancing
How do we measure PPE?
Cost. Cost - residual value
Useful economic life
Revaluation. Cost
Less depreciation
NBV
Revaluat surplus
Carrying amount
When do we start depreciation?
We depreciate from when asset is ready for use until derecognised.
