ias 16 Flashcards
What does IAS 16 stand for?
International Accounting Standard 16
True or False: IAS 16 applies to investment property.
False
What is the main focus of IAS 16?
The recognition, measurement, and disclosure of property, plant, and equipment.
Fill in the blank: IAS 16 requires that an asset is recognized if it is probable that future economic benefits will flow to the entity and the cost can be ______.
measured reliably
What are the two measurement models allowed under IAS 16?
Cost model and revaluation model.
Under IAS 16, how should an asset be initially measured?
At cost.
True or False: Depreciation is not required under IAS 16.
False
What is depreciation?
The systematic allocation of the depreciable amount of an asset over its useful life.
What is meant by the term ‘useful life’ in IAS 16?
The period over which an asset is expected to be used by the entity.
Multiple Choice: Which of the following is NOT a factor to consider when determining the useful life of an asset? A) Expected usage B) Physical wear and tear C) Market demand D) Legal restrictions
C) Market demand
What is the revaluation surplus?
The increase in the carrying amount of an asset when it is revalued.
True or False: Under IAS 16, assets can only be revalued upwards.
False
What is the treatment of revaluation losses under IAS 16?
Revaluation losses are recognized in profit or loss unless they offset a revaluation surplus.
Fill in the blank: IAS 16 requires entities to assess their assets for ______ at the end of each reporting period.
impairment
What is the definition of ‘impairment’ according to IAS 16?
When the carrying amount of an asset exceeds its recoverable amount.
What must be disclosed in the financial statements according to IAS 16?
The accounting policies adopted, the carrying amount of each class of asset, and the depreciation methods used.
Multiple Choice: Which of the following costs can be included in the cost of an asset under IAS 16? A) Purchase price B) Installation costs C) Initial delivery and handling costs D) All of the above
D) All of the above
What is the ‘carrying amount’ of an asset?
The amount at which an asset is recognized in the balance sheet.
True or False: IAS 16 allows for the recognition of subsequent expenditures on an asset as part of its cost.
True
What is a ‘class of assets’ according to IAS 16?
A grouping of assets of a similar nature and use in the entity’s operations.
Fill in the blank: An entity must assess the ______ of its property, plant, and equipment at least annually if it uses the revaluation model.
fair value
What happens to the carrying amount of an asset if it is revalued downwards?
It is reduced to its fair value.
True or False: IAS 16 requires a systematic approach to depreciation.
True
What is the ‘depreciable amount’ of an asset?
The cost of an asset minus its residual value.
Multiple Choice: Which of the following is NOT a depreciation method allowed under IAS 16? A) Straight-line method B) Declining balance method C) Sum-of-the-years’-digits method D) Market value method
D) Market value method
What is the purpose of the residual value in the context of IAS 16?
To estimate the amount that an entity expects to obtain from an asset at the end of its useful life.
Fill in the blank: IAS 16 states that the cost of an asset must be allocated over its useful life through ______.
depreciation
What is the significance of the ‘cost model’ in IAS 16?
Under the cost model, assets are carried at cost less accumulated depreciation and impairment losses.
True or False: IAS 16 applies to biological assets.
False
What is required when an asset is disposed of according to IAS 16?
The gain or loss on disposal must be recognized in profit or loss.
