PPE

Question 1

PPE are

Answer 1

Tangible items;
a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes
b) are expected to be used during more than one period

Question 2

PPE should be recognized if

Answer 2

1) It is probable that future economic benefits associated with the item will flow to the entity
2) The cost of the item can be measured reliably

Question 3

Cost of PPE

Answer 3

Purchase price
+ Other directly attributable costs
+ initially estimated costs of dismantling and removing the item

Not be included;

Question 4

Measurement PPE

Answer 4

Cost model; measurement at cost less accumulated depreciation and impairment losses

Revaluation model: Measurement at fair value determined at regular revaluation dates less any subsequent accumulated depreciations and impairment losses

Question 5

Most common depreciation methods

Answer 5

Activity method
Straight-line method
Diminishing-chare method
Sum of the years’ digits method

Question 6

Revaluation model allowed to use if:

Answer 6

1. Fair value of an item can be measured reliably
2. Revaluations are mode with sufficient regularity (not necessarily annually, but typically 3-5 years
3. The entire class of PPe to which that asset belongs should be revalued

Question 7

Asset revaluation surplus may be transferred to retained earning

Answer 7

Assets with an indefinite useful life; Whole revaluation surplus may be transferred to retained earnings if the asset is derecognized

Assets with limited useful life; A proportion of the revaluation surplus may be transferred to retained earnings, if an asset is being used up over its useful life.

Question 8

Repaid/maintenance vs major inspections/improvements

Answer 8

Maintenance and repairs: Costs incurred to maintain the expected operating condition of the asset => costs are expensed when incurred

Improvements and betterments: Costs incurred to make an asset perform better than it did initially. => costs are capitalized and depreciated over the useful life. Capitalisation requires increased probable future economic benefit
- Major inspections are treated like improvements.

Question 9

Derecognition of PPE

Answer 9

1. On disposal
2. When no future economic benefits are expected