PPE Flashcards
Recognized as PPE if
- Probable the future economic benefits associated with the asset will flow to the entity
- The costs can be measured reliably
Costs that can be capitalized
- Purchas P inc shipping, import duties, non ref taxes
- Costs to bring asset to location and make useable for operations
- estimate of dismantling & removing item & restoring site (decommissioning ch)
Componentization
If asset is made up of parts with different usage rates the asset must be broken up and depreciated appropriately per part
Borrowing costs
IFRS - Capitalize
ASPE - can expense or capitalize
Land costs to capitalize
Purchase P Legal fees Prop transfer tax Title search Demolishing of unusable building
Building construction costs to capitalize
Construction materials
Construction labour
mgmt. costs
borrowing costs
Useful life
Period the asset will be available to use
Straight line
Cost of asset - residual / estimated useful life
Declining balance
Assumes most benefit in early years
Cost of asset x dep rate = Depreciation
Opening - depreciation = Closing (new carrying)
yrs 2 Carrying x dep rate = depreciation
ect
Carrying value
Original purchase price - depreciation
Units of production method
- Estimate total units to generate over whole useful life
- Cost - residual / total units = dep rate
- each yr do units used x rate
IFRS choices for PPE
Cost model or Reevaluation model
cost = historic - depreciation Reevaluation = FMV - depreciation
Reevaluation
Asset is written up or down to FMV at each reporting period.
Reevaluation Gain
Included in NI up to amount of previous loss
Remaining goes to OCI
dr. Land
cr. gain on revaluation of land
cr. OCI - Revaluation surplus
Reevaluation loss
Record in OCI up to amount of gain in OCI
Remaining goes to NI
dr. OCI - Revaluation Surplus
dr. Loss on revaluation of land
cr. Land
