L3/5: Property, Plant and Equipment & Re-valuation + AC for Intangible Assets Flashcards
The requirements of IAS 16 Property, plant and equipment (PPE)
- Tangible assets
- Held for use in the business
- Expected to be used for more than one year
When do you recognise assets in PPE?
Recognise when:
- It is probable that future economic benefits associated with the item will flow to the entity;
- the cost of the item can be measured reliably.’
How do you formulate the cost of new assets?
- Purchase price.
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- Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management’.
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- The initial estimate of the costs of dismantling and removing the item and restoring the site.
How do you deal with new costs relating to an asset in PPE?
- Treat the old asset as a disposal in P/L
- Recognise new as asset within PPE
e requirements of IAS 23 Borrowing Costs, and how to capitalise borrowing costs.
Key depreciation methods and its implications for financial reporting
What is the principle of IAS 23 Borrowing costs?
‘Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset.
Other borrowing costs are recognised as an expense.’
What is a qualifying asset under IAS 23 Borrowing costs?
An asset that necessarily takes a substantial period of time to get ready.
Normally PPE, Inventory or Intangible assets.
How do you calculate the amount of borrowing if a specific loan is taken out for that asset?
Actual borrowing costs incurred on the loan
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Interest income from investment of surplus
= Borrowing to capitalise
How do you calculate the amount of borrowing if a general loan is used for an asset?
Amount spent on asset
x
Weighted average interest rate
= Borrowing to capitalise
Whats the re-valuation model for PPE?
When PPE is revalued in order to fairly reflect its fair value
Whats the technical title for revaluing assets?
IFRS 13 Fair Value Measurement
Whats the technical term for Intangible Assets?
IAS 38 Intangible Assets
Definition of IAS 38?
‘An intangible asset is an identifiable non-monetary asset without physical substance.’
Whats the recognition requirement for IAS 38
- Is it probable that economic benefits will flow to the entity?
- Can the cost be measured reliably?
