PPE

Question 1

What is PPE and how is it recognized as an asset

Answer 1

PP&E are expenditures on tangible items that have an extended future benefit of longer than one year. PP&E is held by the entity for the entity’s use in the production or supply of goods and services. It can also be held for rental to others. PP&E is only recognized as an asset if the following criteria apply:
• It is probable that future economic benefits associated with the item will flow to the entity.
• The cost of the item can be measured reliably.

Question 2

what is included in PPE asset cost

Answer 2

Generally, all costs to acquire, construct, and bring the asset to an operational state are considered part of the cost of the asset.

Question 3

what is included in purchase of land

Answer 3

Directly attributable costs incurred become part of the cost of the land, including costs for the following:
• commissions
• legal fees
• title search
• property transfer taxes
costs to make the land usabel e.g drainage.

Question 4

What is componentization in depreciation

Answer 4

if the usage pattern is the same for entire equipment, then it will be depreciated at same rate e.g laptop.
If parts depreciate differently e.g airplanes, then parts that depreciate similarly should be grouped together.

Question 5

what is included in the capitalization of a constructed asset

Answer 5

When an asset is constructed, such as the building of a factory, all directly attributable costs of the construction can be capitalized. For the construction of a new building, the following costs can be capitalized as part of the building:

• construction permits
• site survey costs
• construction costs, including labour, direct management salaries, and materials
• direct borrowing costs incurred to finance the construction until the occupation permit is obtained (note ASPE difference here — see Section 4, Differences between IFRS and ASPE)
• professional fees

Question 6

What revaluation model and how it is recorded

Answer 6

revaluation model is alternatiive to cost model,

In increase in an asset after revaluation is a debit to the asset and credit to OCI and vice versa if it is a loss

Question 7

Differences in ASPE and IFRS

Answer 7

check summary PPE for
1. Interest capitalization for self-constructed assets
2.Measurement basis
3 Derecognition
4. straight line depreciation

Question 8

What is IAS and ASPE

Answer 8

IAS 16 and ASPE 3061