IAS 16: PPE Flashcards
Definition PPE
TANGIBLE assets (having physical substance)
HELD FOR USE in the production or supply of G’s & Svs..for rental to others, or for Admin purposes.
Which are expected to be used for MORE than 1 period.
Definition Dep’n
The Systematic Allocation
of the Depreciable Amount of an asset
over its Useful Life
Definition Depreciable amount
The Cost or Valuation of the asset
less any Residual Value
Definition Useful life
The length of time
or the number of units of production
for which an asset is expected to be used.
Definition Fair value
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (date of valuation)
Definition Impairment Loss
The amount by which
the carrying amount of an asset
exceeds its recoverable amount
Definition Recoverable Amount
Is the Higher of
the asset’s Fair Value less costs to sell and
it’s Value in Use (VIU is NPV of inflows)
Definition Carrying Amount
The amount at which an asset is recognised on the SFP after deducting any Accumulated depreciation and Impairment loss
When should items of PPE be recognised as assets
- When it is PROBABLE that future economic benefits will flow to the entity.
- The cost of the asset can be measured reliably
Cost model
The asset is carried at Cost less Accumulated Dep’n and impairment losses.
(Think about ‘how do I get to CA’ (uk term: Net BV))
Revaluation model
The asset is carried at a Revalued amount
bein FV less any SUBSEQUENT dep’n and impairment losses.
revals are to be regular to ensure CA does not differ Materially from its FV at the date of the SFP
when an item of PPE is revalued the entire class of assets to which it belongs must be revalued.
Any INCREASE is recognised in OCI and credited within Equity as a Revaluation surplus
(unless its a reversal of a decrease in which case recognise as Income in the SPLOCI)
Any REDUCTION is recognised as an expense in the SPLOCI
(unless a reversal of an increase in which case recognise as OCI and Debit to Reval surplus in Equity
Revaluation ..
How to calculate the reveal surplus
The difference between the CARRYING AMOUNT and the new Fair Value
NOT the difference between Historic Cost and the new Fair Value
