Property Plant And Equipment Flashcards
What is the primary focus of IAS 16?
Property, Plant and Equipment
IAS 16 outlines how to recognize, measure, and disclose property, plant, and equipment.
When should an asset be recognized according to IAS 16?
When it is probable that future economic benefits will flow to the entity and the cost of the asset can be measured reliably
This includes criteria for initial recognition.
What are the two methods of subsequent measurement for property, plant, and equipment allowed by IAS 16?
- Cost model
- Revaluation model
Each method has specific requirements regarding depreciation and asset valuation.
What does the cost model entail?
Carrying the asset at cost less accumulated depreciation
This is one of the two methods for measuring property, plant, and equipment after initial recognition.
What is the revaluation model?
Carrying the asset at revalued amount less subsequent accumulated depreciation
Requires regular revaluations to reflect fair value.
What is considered ‘fair value’ in the context of IAS 16?
The price received if the asset is sold in an orderly transaction between market participants at the measurement date
This is defined by IFRS 13.
What is the depreciable amount of an asset?
Cost or revalued amount less residual value
This amount is allocated over the asset’s useful life.
When should the depreciation method be changed?
Only if there is a significant change in the expected pattern of consumption of economic benefits
IAS 16 does not specify which method to use.
What must be done with accumulated depreciation when an asset is revalued?
It can either be eliminated or proportionally restated
The choice of method affects how the revaluation is recorded.
How should gains on revaluation be reported?
Credit to revaluation surplus, reported through other comprehensive income, unless it cancels out a previous loss
This ensures proper accounting treatment of revaluation gains.
What happens to losses on revaluation?
Debited to revaluation surplus until eliminated, then recognized as an expense in the Statement of Comprehensive Income
This ensures that losses are accounted for correctly.
What is the treatment of depreciation for revalued assets?
Depreciation is still required even if the asset has been revalued
This applies unless the asset is land.
What must be disclosed regarding property, plant, and equipment revaluations?
- Basis of valuation
- Methods used
- Significant assumptions made
- Effective date of valuation
- Involvement of independent valuers
- Carrying amount if held at cost
- Revaluation surplus
These disclosures provide transparency in financial reporting.
Fill in the blank: The _______ is the amount recognized in the Statement of Comprehensive Income when an asset is disposed of.
Gain or loss on disposal
This is calculated based on the proceeds from the sale and the carrying amount.
True or False: Land is normally depreciated according to IAS 16.
False
Land is not depreciated, while buildings are depreciated.
What must be done with the depreciation charge prior to accounting for the revaluation?
It must be accounted for first
This ensures accurate comparison with the new valuation.
What is the treatment of revaluation surplus over the remaining useful life of an asset?
It can either be left until future revaluation or amortized
This gives companies flexibility in handling revaluation surpluses.
What is the role of the accumulated depreciation in the revaluation process?
It is eliminated or restated to reflect the new valuation
This is part of the accounting for revaluation under IAS 16.
