IAS16 - PPE Flashcards
what is IAS16 about?
PPE
what is IAS36 about?
impairment of assets
does measurement of PPE include asset dismantlement costs?
yes
cost of dismantlement, removal or restoration
measurement at recognition for assets that have been exchanged for other assets?
fair value initially
subsequently revaluation model
is depreciation calculated identically for each significant part of an item of PPE?
no, depreciation charge is separate for each significant part of an item of PPE
residual amount?
the amount expected to be received once useful life is lived
depreciation period begins when?
when the item is available for use
ends when derecognised or no longer expected to give future economic benefits
how does derecognition work?
derecognition occurs either when:
- no more economic benefits are expected
- put up for sale/disposed of
objective of IAS16?
to prescribe the treatment for PPE in FSs
cost of PPE?
amount of cash paid to acquire an asset at the time of its acquisition
depreciable amount?
the cost of an asset less its residual value
depreciation?
the systematic allocation of the depreciable amount of an asset over its useful life
entity-specific value / VIU?
the PV of future cash flows an entity expects to arise from the use of an asset and from its disposal
fair value?
the price that would be received for the asset in an orderly transaction today
impairment loss?
the amount by which the carrying amount exceeds the recoverable amount
PPE?
tangible items that:
- are held for use in production of goods/services, rental to others or admin purposes
- are expected to be used during more than one period
recoverable amount?
higher of:
- VIU
- fair value less costs to sell
residual value?
the estimated amount that an entity would obtain on disposal of the asset at the end of its useful life
useful life?
the period over which an asset is available for use by an entity
or
the number of production/similar units expected to be obtained by an entity from the asset
when should an item of PPE be recognised?
- if its probable that future economic benefits will flow from the asset
- if the cost can be measured reliably
how are servicing costs recognised?
in the P&L as expenses
how are items of PPE measured at recognition?
cost
elements of cost?
- purchase price
- cost of dismantling
- cost of bringing the asset to location & making it usable
measurement of PPE after recognition?
cost or revaluation model
cost model?
asset is carried at cost less depreciation less impairment losses
revaluation model?
asset is carried at fair value less depreciation less impairment losses
if an item of PPE is revalued…
the entire class of PPE should be revalued
class of ppe?
grouping assets of a similar nature
e.g., separate classes:
- land
- land & buildings
- machinery
- aircraft
- motor vehicles
- furniture & fixtures
- office equipment
are assets within a class of PPE revalued simultaneously?
yes
if an asset’s carrying amount increases…
the increase is recognised in other comprehensive income and accumulated in equity under ‘revaluation surplus’
if an asset’s carrying amount decreases as a result of revaluation..
the decrease is recognised in the profit & loss
the decrease should be recognised in other comprehensive income to the extent of the credit balance in revaluation surplus with respect to that asset
this reduces the accumulated revaluation surplus
where does the revaluation surplus included in equity transferred to when the asset is derecognised?
retained earnings
how often should residual value and useful life of PPE be reassessed?
at the end of each financial year
how is a change in expectations surrounding useful life or residual value treated?
accounted for as a change in accounting estimate and dealt with prospectively
depreciation method used should reflect the…
the pattern in which the asset’s expected to be used
how often should the depreciation method be reassessed?
at the end of each financial year
s-l method?
declining balance method?
units of prod. method?
- straight-line = equal amount each year
- declining = varying amount each year
- units of prod - generally equal unless change in asset’s usage
how is a change in depreciation method accounted for?
as an accounting estimate
prospectively
when is an item of PPE derecognise?
- on disposal
- when no future economic benefits are expected
how is the gain/loss arising from derecognition of an item of PPE treated?
recognised in the P&L under other comprehensive income
gains are not revenue
how is the gain on disposal of PPE calculated?
proceeds less carrying amount
what should the FS disclose regarding PPE?
- measurement bases used
- depreciation method used
- useful life/depreciation rates
- carrying amount & acc. depreciation
