Property Plant And Equipment

Question 1

Scope of IAS16

Answer 1

Apply the accounting for PPE except when another standard permits otherwise (e.g. asset held for sale)
applies to investment property carried on the cost model

Question 2

Objective of ias 16

Answer 2

Accounting treatment of an entity’s PPE
Timing of recognition
Determine carrying amount
Determine depreciation and impairment losses

Question 3

Property plant and equipment

Answer 3

Tangible items that are held for use in the production or supply of goods or services, for rental to others, admin purposes, and are expected to be used for more than one period

Question 4

Recognition

Answer 4

Initial recognition
subsequent recognition

Question 5

Recognition criteria

Answer 5

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

Question 6

Recognition of safety and environmental costs

Answer 6

Do not directly increase the future economic benefits of existing PPE, but they are necessary to ensure that the entity obtains the future economic benefits from its other assets

Question 7

Recognition of subsequent costs

Answer 7

Parts/components replaced regularly are recognised separately
Derecognise old parts when the replacement occurs.
Major inspection: recognise cost in the carrying amount of PPE

Question 8

Initial measurement

Answer 8

Purchase price (includes import duties, non-refundable taxes, and excludes trade discounts)
Directly attributable costs
asset dismantling removal and restoration costs
borrowing costs on qualifying assets

Question 9

Directly attributable cost definition

Answer 9

Costs that are necessary to bring the asset to the location and condition necessary for it to operate as intended by management

Question 10

Examples of directly attributable costs

Answer 10

Cost to prepare the site
handling and delivery costs
installation and assembly cost
professional fees
cost of testing

Question 11

Self-constructed assets

Answer 11

Costs that are directly linked to the construction of assets are capitalised onto the cost of assets

Question 12

Examples of directly attributable cost for self-constructed assets

Answer 12

Direct labour
raw materials used
depreciation
overheads and fixed costs
Direct professional fees

Question 13

Costs not included

Answer 13

Opening new facility
Introducing new products (ads and promos)
New location (staff training)
Administrative and overheads
Operating losses
Relocation

Question 14

Deferred payment

Answer 14

PPE is initially measured at cash price equivalent
The difference between total deferred payment and cash price equivalent is interest

Question 15

Measurement at fair value

Answer 15

When fair value of asset given up can be determined reliably and has commercial substance

Question 16

Measurement at carrying amount

Answer 16

When they value of asset given up cannot be determined reliably and has no commercial substance

Question 17

Commercials substance

Answer 17

Risks, timing, and amount of cash flows of the asset received differ from the asset given up
Entity specific value of the portion of the entity’s operations affected by the transaction changes

Question 18

Components

Answer 18

Identify significant components
recognise significant components separately using recognition criteria
allocate cost to components
when replaced, derecognize old and recognise new
major inspections are capitalised

Question 19

Measurement models

Answer 19

Cost model
Revaluation model

Question 20

Cost model

Answer 20

Cost less accumulated depreciation and accumulated impairment losses

Question 21

Revaluation model

Answer 21

Fair value at date of revaluation less subsequent accumulated depreciation and accumulated impairment losses

Question 22

Depreciation

Answer 22

Systematic allocation of depreciable amount of an asset over the useful life

Question 23

Depreciable amount

Answer 23

Cost less residual value

Question 24

When do we begin depreciating

Answer 24

When the asset is available for use and continues until the asset is de-recognised, even if it is idle
Residual value is less than carrying amount

Question 25

Useful life

Answer 25

The period an asset is expected to be available for use

Question 26

Systematic allocation

Answer 26

The depreciation has to charge according to the methods and policies about those methods

Question 27

Depreciation methods

Answer 27

Straight line
diminishing balance
units of production

Question 28

Where is depreciation recognised

Answer 28

Charged to profit or loss

Question 29

Common errors of depreciation

Answer 29

Wrong date
wrong remaining useful life
no apportionment
residual value not deducted for depreciation
residual value is deducted from the final carrying amount

Question 30

Revaluation model approaches

Answer 30

Market approach
cost approach
income approach

Question 31

Revaluation of non depreciable asset

Answer 31

If the carrying amount is increased through a revaluation, the increase is recognised in comprehensive income and accumulated in equity (OCI)

Question 32

When do we derecognize an asset

Answer 32

Disposed of assets
no future economic benefits are expected from use or disposal of asset

Question 33

Presentation and Disclosure

Answer 33

Statement of financial position: non-current asset PPE
Statement of profit or loss: depreciation, amortisation, and impairment losses
PPE note