PPE Flashcards
When can PPE be recognised?
- probable economic flow to the business
- cost can be measured reliably
How is PPE measured?
Either at purchase price or production cost
Which standards allow capitalisation of interest?
- FRS15 gives choice
- FRS102 gives choice for qualifying asset (if it takes a long time to build)
- IAS23 requires capitalisation
What is the policy of subsequent expenditure?
If it further improves the PPE, it is capitalised.
If old part is replaced, denounce old part and capitalise new part.
When should useful economic life of PPE be reevaluated?
Under FRS15 and IAS16, very financial period.
Under FS102 whenever there is suspicion to do so.
When should PPE be depreciated?
Under FRS102: always depreciate
Under IAS 16: always depreciate unless residual value exceeds NBV
When should there be a revaluation?
FRS15 says 5 years, 3 years interim
FRS102 says it should be regular enough so there is no material differences
IAS16 says it depends on market values
What is impairment?
When carrying value of an asset is > than recoverable value (NBV)
What to do when impairment occurs
Revise to higher of net selling price or value in use. Impairment loss is written off to P&L, unless there is a revaluation account where the value is wiped off it first.
When to review for impairment?
Under IAS36: if there is some indication
Under FRS11: if there is some indication or asset is not being depreciated
Under FRS102: at every balance sheet date
What are investment properties standards?
IAS40, FRS102 sect16
What is the investment property treatment?
Under FRS15 revaluation as per normal property.
Under FRS102 reevaluate at each accounting date.
Under IAS40 you can value at market value or cost value.
What is the definition of PPE?
They need to be used on a continuing basis, and to produce
