IAS 16 Flashcards
Purpose of IAS 16
Establishes principles for recognising PPE as assets
Measuring carrying amounts
Impairment losses recognsied in relation to them
What is PPE?
Tangible items used in production or supply of goods or services, rental to others, adminsitrative purposes
Useful life for PPE?
More than one period
What other assets does IAS 16 include?
Bearer plants related to agricultural activities
When is cost of asset recognised?
Probable that future economic benefits associated will flow into the entity
Cost of item measured reliably
Measuring an asset (first step)
Purchase price & purchase related costs
Measuring an asset (second step)
Costs attributable to bringing asset to location and condition necessary for it to be capable of operating in manner intended by management
Measuring an asset (third step)
Costs of dismantling and removing item and restoring the site it’s located on
Excludes inventories related to that period
What happens after recognition of an asset?
Use cost model or revaluation model for entire class of PPE
Cost model calculation?
Cost - accumulated depreciation - accumulated impairment losses
Revaluation model calculation?
Fair value - accumulated depreciation - accumulated impairment losses
Revaluation increases and decreases recognised in?
Recognised in OCI and accumulated in equity
What is depreciation?
Systematic allocation over useful life
How is depreciation recognised?
In SPL unless it is included in carrying amonut of another asset
Consistent policy is used for?
Each of the assets
Depreciate revalued amount?
Revalued amount - depreciation over remaining life. Not original cost
Reverse transfer for SCE
Depreciation for revalued amount - depreciation for original amount
Other components of equity (revaluation increase) calculation? (Equity section in SFP)
Revaluation surplus - reserve transfer
Directly attributable costs?
Conducting business in new location
Employee benefits
Initial delivery and handling
Professional fees
Is land depreciated?
No
Calculate accumulated depreciation?
(Initial cost / useful life) * number of periods
If there is a change in useful life of an asset?
The new useful life is used
Subsequent depreciation straight-line?
(Original cost / number of years). If no change in useful life
Subsequent depreciation reducing balance?
(CV * percentage)
Revaluation decrease double entry?
Credit PPE
Debit Impairment OCI
Debit Impairment SPL (B)
Calculate reserve transfer?
Old depreciation expense - new depreciation expense
Change in useful life treatment?
Adjust for prior years (e.g. if plant purchase was in 20X0 and in 20X2 useful life changed to 8 years. Years used in depreciation will be 8-2=6)
Cost of an overhaul?
Added to the carrying amount
How are unused materials treated?
Deducted from value of NCA
Entire class of PPE?
Must use the same cost or revaluation model
