Part 9 - PPE

Question 1

What is bearer plant?

Answer 1

meets following criteria:

• used in the production or supply of agricultural produce
• expected to bear product for more than one period
• remote likelihood of being sold as agricultural produce, except for incidental scrap sales

Question 2

When to record PPE?

Answer 2

when:

• it is probable that future economic benefits associated with the item will flow to the entity
• cost of item can be measured reliably

Question 3

How to recognize spare parts, stand-by equipment?

Answer 3

recognize if they meet the recognition criteria, otherwise classify as inventory

Question 4

What are some elements of cost recorded in the initial measurement?

Answer 4

purchase price
cost directly attributed to bring asset to location
basket purchase - allocation of purchase price based on each item’s relative fair value

Question 5

When do commercial substance exists?

Answer 5

• configuration (risk, timing, amount)of cash flow received differs from asset transferred
• entity specific value of the portion of entity’s operation affected by the transaction as a result of exchange
• difference in either above factor is significant relative to FV of asset exchanged

Question 6

What are asset retirement obligation?

Answer 6

obligation to dismantle, remove and restore items of PPE

Question 7

How to measure asset retirement obligation?

Answer 7

cost is capitalized to asset and offsetting liability recorded. Discount if material. - accrual interest expense on liability each yr based on discount rate

if cost model - asset/liability adjusted on a prospective basis

• revaluation model - adjust liability
• decrease in liability - credit to other comprehensive income
• increase in liability - debit profit/loss

Question 8

What are related party?

Answer 8

• person or close member are related if:
  
  • has control or joint control over the reporting entity
  • has significant influence over the reporting entity: or
  • is a member of the key mgmt personnel of either reporting entity or parent

Question 9

An entity is related to a reporting entity if any of the following conditions applies:

Answer 9

• entity and reporting entity are member of the same group
• one entity is an associate or joint venture of the other entity
• both entities are joint ventures of the same 3rd party
• one entity is a joint venture of a 3rd entity and the other entity is an associate of the 3rd entity
• entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity
• entity is controlled by related party
• significant influence
• a part of key management

Question 10

What is economic dependents?

Answer 10

when viability of ongoing operations depend on a significant volume of business with another party, should be disclosed

Question 11

What’s the measurement for a related party transaction in ASPE 3840 ?

Answer 11

recorded at carrying amount (any difference will be charged to equity)

• if there are commercial substances and normal operations - record at exchange amount (amount of consideration paid or received)
• non-monetary RPT that’s exchange of a product held for sale in a normal course of operation to be sold in the same line of business - measure at carrying amount of asset given up adjusted by the FV of any monetary consideration received/given
• Commercial substance but not normal course of operation - exchange amount
  
  • must have substantive change in ownership interest of item transferred or benefits of services provided - transaction results in unrelated parties having acquired or given up at least 20% of total equity ownership
  • amount supported by indep evidence