Non-current Assets Flashcards
IAS16 PPE defines PPE as?
Tangible items which are used to produce or supply goods, for rental, or for administrative purposes over more than one period.
What’s the difference between revenue and capital grants?
Revenue grants relate to operating costs and capital grant relate to asset purchases
How are revenue grants treated?
Match in SPL with related costs
How are capital grants treated? Including the 2 approaches as per IAS20 Accounting for Gov Grants and Disclosure of Gov Assistance
Match in SPL with related depreciation
Netting off approach - deduct grant from cost of asset
Deferred income approach - record grant as deferred income
At what point are government grants recognised?
when reasonable assurance conditions will be complied with and grant will be received
How does IAS23 Borrowing Costs define a qualifying asset?
One that takes substantial time to get ready
How does IAS23 Borrowing Costs deal with capitalisation?
begin when expenditure, borrowing costs and activities have begin
suspend if development interrupted
cease when asset is substantially ready for use or sale
How does IAS40 define investment property?
land or building held for rental and/or capital appreciation or it is land held for an undecided use
How are investment properties recognised initially?
purchase price + direct costs
How does the cost model and revaluation model differ for investment property?
cost depreciate over UEL/reval no dep
cost p/l on disposal in SPL/reval gains/losses recorded in SPL
How does IAS 38 define intangible assets?
non-monetary assets with physical substance
How are intangible assets initially recognised?
at cost (purchase price + direct costs)
do not recognise if internally generated (unless arises from development)
For intangible assets, both the cost model and revaluation model amortise over useful life and the profit/loss on disposal goes to SPL. What differences can be called out?
reval only allowed if active market exists
reval gains in OCI. Reval losses in SPL if no reval surplus
IAS36 states an impairment review should be carried out;
-annually for certain assets (e.g. intangible NCA with an indefinite UEL)
-where there are indications of impairment for other assets
IAS38 stipulates development expenditure may meet the recognition criteria if all of the following 6 conditions are met;
-completion of asset is technically feasible
-intention is to complete and use/sell the asset
-asset can be used/sold
-asset will generate future economic benefits
-adequate resource is available to complete the asset
-expenditure on the asset can be measured reliably
What are 4 indications of impairment?
-decline in market value of asset
-adverse changes to the environment in which the entity operates
-asset obsolescence, damage or idleness
-value of entity as a whole being less than the carrying amount of it’s net assets
Recoverable amount is the higher of;
-value in use
-fair value less costs to sell
What is a cash generating unit?
smallest group of assets that generates cash flows
How is the impairment allocated normally?
Charge to spl
Charge to OCI to extent reval reserve exists. excess to spl
How is the impairment allocated for CGUs?
allocate firstly to goodwill then to other assets in proportion to carrying amount (an asset can’t be reduced below its recoverable amount, impairment can be reversed except for goodwill)
If the carrying amount > recoverable amount then?
write down assets
IFRS 5 NCA Held for Sale and Discontinued Operations, carrying amount will be recovered primarily from a sales transactions. States 4 criteria linked to below;
Must be available for sale in PRESENT CONDITION and sale must be HIGHLY PROBABLY
-sale expected within 12 months
-management committed to plan
-marketed at fair value
-activate programme to find buyer
How are assets held for sale measured? along with 3 extra criteria linked to measurement
lower of carrying amount and fair value less costs to sell
-present below current assets
-stop depreciation
-if fair value model used, revalue before classification
