Masterclass 2 (Topic 7,8,10) Flashcards
IAS 16 - PPE - What are tangible assets?
Assets held by the entity for use in production or supply of good and services.
To be used for more than one period
When should a tangibe asset be recognised? In accordance with IAS 16 PPE
- it is probable that future economic benefits will flow to the entity and
- the cost of the asset can be reliably measured
IAS16 - PPE - How should the asset be initially measured?
-Purchase price, inc import duties, exc. trade discount & sales tax
-Cost to dismantle & removing assets and restoring the site in which it is located
- Anything to bring the asset to a useable use i.e
Site prep
Delivery costs
Installation & assembly
Professional fees (lawyers,architects,engineers)
Staff cost of construction of asset
What subsequent expenditure can be capatalised under IAS 16
Modification
Upgrade
Adopton of a new production process
(adds something to the asset, improves)
Revaluations - What are the 2 models under which an item of PPE can be measured? (IAS16)
Cost Model (cost less accumulted depreciation)
or
Revaluation Model (fair value less accumulated depreciation)
When choosing to revalue and asset, an entity must revalue all assets in that category and revalue regularly.
The revaluation must be done by a professional valuer and cannot be done internally
What are the steps to revalue an asset upwards?
- Restate the cost to the revalued amount (DR)
- Remove existing accumulated depreciation (DR)
- Transfer the increase to the revaluation surplus (CR)
- Re-calculate the depreciation on the revalued amount
What are the steps to revalue an asset downwards?
- Restate the cost to the revalued amount (DR)
- Remove existing accumulated depreciation (DR)
- Offset the decrease against the revaluation surplus created for that particular asset or expense to PL if there isnt enough
- Re-calculate depreciation on the revalued amount
What does a disclosure note for PPE show under IAS 16
- The movement of PPE during the year
- The closing Carrying Value should match the PPE figure on the SFP
What is an Impairment Loss?
An Impairment loss is where the carrying amount of an asset exceeds the recoverable amount
What is the recoverable amount (under IAS 36 Impairment Loss)
The Recoverable amount is the higher of:
Fair value less costs to sell or;
Value in use (present value of future cashflows arising from and disposal of asset)
When would you test for impairment?
Decline in market value
Technological, lega or economical changes
Physical damage
Plans to dispose of asset
What is the objective of IFRS 5?
The objective is to specify the accounting for assets held for ale and the presentation and disclosure of discontinued operations
What are the criteria for an Asset held for sale under IRFS 5?
Available for immediate sale and,
The sale must be highly probable i.e
- Management commitment to the sales
- Avaialbe for immediate sale in its present condition
- Actively marketed
- Sale is highly probable i.e offered at a reasonable price
- Sale must be expected to be complete within one year of classification (becoming held for sale)
How do we account for an Asset held for sale?
The asset or group of assets are removed from non-current assets on the SFP and moved into their own section as Non-current assets held for sale
Are Assets held or sale depreciated?
No.