Non Currentassets

Question 1

What is s non- current asset

Answer 1

• A non-current asset is used in the business for greater than one accounting period. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 2

Learn

Answer 2

All costs directly attributable to bringing an asset to its intended location and condition necessary for it to operate may be capitalised. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 3

Learn

Answer 3

Subsequent expenditure that enhances the performance of an asset may be capitalised, all other expenditure (referred to as revenue expenditure) should be expensed (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 4

• Assets are depreciated over their useful economic lives to reflect the consumption of economic benefits in each financial period and is an application of the accruals concept. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Answer 4

Learnt

Question 5

Depreciation of assets

Answer 5

• Straight line depreciation is calculated as either

– (Initial cost – Residual value)/Useful life of asset in years

– Original cost × % (to reflect useful life) (D5b, D5f) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 6

Reducing balance depreciation

Answer 6

• Reducing balance depreciation is calculated as (Original cost – Accumulated depreciation b/fwd) × % (to reflect useful life) ( (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 7

Journal for depreciation

Answer 7

• Journal to record depreciation: (D5d, D5g)

Dr
Depreciation expense (SPL)
Cr
Accumulated depreciation (SFP) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 8

Profit or loss on disposal

Answer 8

• The profit or loss on disposal of a non-current asset is the difference between carrying value and any proceeds (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 9

• Proceeds may either be in the form of cash or a ‘part exchange allowance’ (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Answer 9

Learnt

Question 10

Remember

Answer 10

• Businesses may choose to revalue a non-current asset where its carrying value is substantially different to its market value. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 11

Know

Answer 11

• Where an asset is re-valued subsequent depreciation is based on the revised value, divided by the remaining useful economic life. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 12

Know

Answer 12

(D5e)

• On a re-valued asset, the amount by which the new depreciation exceeds the old depreciation should be transferred to the revaluation surplus. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 13

What is an asset register

Answer 13

• A non-current asset register records details (cost and depreciation to date) for all assets held in the business and is periodically reconciled to the ledgers to identify errors. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 14

Learn

Answer 14

• Regarding internally generated intangible assets, research expenditure is always expensed, development expenditure may be capitalised if the six criteria are all met. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 15

Learn

Answer 15

• Intangible assets are amortised over their useful economic life on a systematic basis and recorded in the accounts as follows: (D6e, D6f)

Dr
Amortisation expense (SCI)
Cr
Accumulated amortisation (SFP) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 16

Accounting for a revaluation gain

Answer 16

Must increase the asset value and create a revaluation surplus

Dr asset cost
Dr accumulated depreciation
Cr revaluation surplus

Question 17

Intangible asset

Answer 17

Identifiable
Controlled by the entity
Non monetary 
Expected to generate economic benefit
And cost reliably measured

Question 18

Learn

Answer 18

Only externally purchased intangibles are allowed to be capitalised

Internally generated intangibles are not allowed to be capitalised except research and development

Question 19

Internally generated intangibles

Answer 19

Research phase , no expectation of economic benefits : always expensed to sopl

Development phase, must capitalise if meets six criteria and amortised once in production

Sofp-> non current assets -> development costs

Question 20

Learn

Answer 20

Intangibles are amortised over their useful lives

If indefinite usedul life then rewieved for impairment instead

Question 21

Indefinite life assets

Answer 21

Assets that have a useful life of forever are not amortised

Subject to annual impairment review

Question 22

Disclosure note

Answer 22

Useful life of the intangibles
Basis of amortisation( straight line/ reducing balance

Details of impaired assets

Reconciliation between opening and closing value

Question 23

Proceeds from disposal

Answer 23

Is equal to nbv of disposed asset plus profits on disposal

Question 24

After the revaluation the subsequent depreciation must be based on the revalued amounts over the remaining useful life or the revised useful life

Answer 24

Learn