lecture 3 Flashcards
what is PPE?
tangible items used for:
-production or supply of goods or services
-for rental to others
-for administrative use
-are expected to be in use for more than one period
examples of PPE?
-Property
-Plant
-Equipment
what is cost of asset?
The historic cost of asset plus taxes, and any cost incurred to make the asset into use.
how else can an asset loose value other than depreciation?
If there are any changes in the market that make the asset less useful. for example, having a house and plans of a dump yard been built around it.
fair value?
Market value of an asset less any loss of impairment
where is routine maintainance included in the financial statements?
Profit and loss statement in the form of opex
where does cost of enhancement go?
it is the amount capitalised and added to an assets carrying amount, an example can be the cost of replacing tyres of a car.
how do you know if you should capitalise or expense a cost related to enhancement/maintainance ?
if it increases the earning capacity of the asset, it should be capitalised.
what are the two ways PPE can be measured?
- the cost model: carrying amount remains stable with accumulated depreciation deducted and less any impairment loss charged.
-re-evaluation model: assets are carried at a fair value less subsequent depreciation and impairment loss.
what is the concept of grouping assets?
initial recognised assets are grouped in ‘‘significant class’ which means they have the same depreciation method. portions of assets are grouped individually if they are not individually significant.
what are elements of costs?
purchase price, import duties, non-refundable tax, purchase tax, less trade discounts
examples of costs not recognised?
-staff training
-initial opening loss
what is depreciation?
systematic allocation of depreciable amount of an asset over its useful life.
depreciable amount?
estimated amount an entity would obtain from disposal of asset
useful life?
estimated period an asset is expected to be available by the entity
