Module 22.4 Noncurrent Assets & Liabilities

Question 1

How can PP&E be reporting under IFRS?

Answer 1

Cost model or the revaluation model

Question 2

How can PP&E be reported under GAAP?

Answer 2

under GAAP only the cost model is allowed.

Question 3

What is the cost model for PP&E? What portion of PP&E is excluded from the cost model?

Answer 3

Historical costs includes the purchase price plus any cost necessary to get the asset ready for use, such as delivery and installation costs.

Land is excluded from the cost model because it has an indefinite life.

Question 4

How does impairment work under IFRS and GAAP if you use the cost model?

Answer 4

IFRS - the recoverable amount of an asset is the greater of fair value less any selling costs, or the asset’s value in use.

Question 5

How does impairment work in the revaluation model under IFRS?

Answer 5

PP&E is reported at fair value less any accumulated depreciation. Changes in fair value are reflected in shareholder’s equity and may be recognized in the income statement in certain circumstances.

Question 6

How is Investment property reported under IFRS?

Under GAAP?

Answer 6

investment property is anything that generates rental income or capital appreciation. Can either be reported at amortized cost or fair value. Under fair value, any changes are recorded on the income statement.

There is no specific definition for investment property under GAAP.

Question 7

When are deferred tax assets created?

Answer 7

when the amount of taxes payable in the income statement exceeds the amount of income tax expense recognized on the income statement.