PPE

Question 1

What is the cost model

Answer 1

after recognition as an asset, an item of PPE shall be carried at its cost less any accumulated depreciation and any accumulated impairment losses

Question 2

What is the revaluation model

Answer 2

after recognition as an asset, an item of PPE whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses

Question 3

Advantage of using the revaluation model

Answer 3

Increases value of assets in statement of financial position

Question 4

Disadvantages of using the revaluation model

Answer 4

Costly expert valuations needed for entire portfolio, regular updating
Gains cannot be paid as dividends

Question 5

What is the depreciable amount

Answer 5

the cost of an asset, or any other amount substituted for cost, less its residual value

Question 6

What is the impairment loss

Answer 6

The difference between the recoverable amount and the carrying amount

Question 7

When should a PPE item be derecognised

Answer 7

When it is disposed of, or no future economic benefits are expected from its use

Question 8

What is the recoverable amount of impaired PPE

Answer 8

The higher of:
Value in use
Fair value - costs to sell

Question 9

3 things to consider when determining the value in use

Answer 9

An estimate of the future cash flows the entity expects to derive from the asset
Expectations about possible variations in the amount of future cash flows
Time value of money

Question 10

Value of a non-current asset held for sale

Answer 10

Lower of its carrying amount and Fair value - costs to sell