IFRS: Property Plant & Equipment

Question 1

PPE: Capitalized cost inclusions

Answer 1

Purchase costs, including duties, unrecoverable taxes net of discounts & rebates
Costs to bring asset to location & condition for use
Major inspection costs
Major spare parts
Standby or servicing equipment
Dismantling, removal, and restoration costs

Question 2

Land & Building capitalized cost inclusions

Answer 2

Commissions
Legal fees
Cost to make asset useable

Allocate separately to land and building

Question 3

Revaluation model when there is an increase to fair market value

Answer 3

1. Gain recognized first to net income up to previous amount of losses
2. Remaining amount to OCI

Question 4

Revaluation model when there is a decrease to fair market value

Answer 4

1. Loss first recorded to OCI up to amount of previous gains

2. Remaining amount to net income

Question 5

Under IFRS and ASPE, can training costs associated with new equipment be capitalized?

Answer 5

No.

Question 6

Componentization

Answer 6

If components of PP&E have significant parts with different usage rates, they must be broken apart. eg. airplane: engine & fuselage.

Question 7

Capitalizable costs in the construction of a new building

Answer 7

Construction permits
Site survey costs
Construction costs (labour, direct management salaries, materials)
Direct borrowing costs incurret to finance the construction until the occupation permit is obtained*
Professional fees

Question 8

Revaluation: Elimination method

Answer 8

Accumulated depreciation reset to 0, asset cost adjusted accordingly

Question 9

Revaluation: Proportional method

Answer 9

Cost & accumulated depreciation adjusted proportionally to achieve an overall carrying amount equal to fair market value