Property, Plant And Equipment

Question 1

What does the IAS 16 define property, plant and equipment as?

Answer 1

• Tangible items
• Held for use in the production or supply of goods and services, for rental or admin purposes
• Expected to be used during more than one period

Question 2

What does the cost of an item of property, plant and equipment comprise of?

Answer 2

• Its purchase price
• Any direct costs of bringing the asset to working condition
• Initial estimate of the costs of dismantling

Question 3

What are examples of directly attributable costs?

Answer 3

• Cost of site preparation
• Initial delivery and handling costs
• Installation and assembly costs
• Professional fees

Question 4

What is needed to calculate the depreciation charge?

Answer 4

• Cost of asset
• Estimated useful life
• Estimated residual value at end of useful life
• Pattern of benefit likely to be

Question 5

What are the different ways to calculate depreciation?

Answer 5

Time based:
* Straight line method
* Reducing balance method
* Sum of digits method

Methods based on activity level:
*Defined as output of asset
* Defined as service quantity of the asset

Question 6

What is The Revaluation Model?

Answer 6

Revaluations occur regularly to ensure the carrying amount reflects the assets current value. If one asset is revalued, the rest in PPE must also be revalued to remain consistent.

Question 7

What is the revaluation model carrying amount formula?

Answer 7

Fair value at date of revaluation - depreciation - losses