Property, plant and equipment Flashcards
What is PPE?
Tangible items held for use in production/supply of goods/admin and expected to be used for more than 1 period
Which models can be used to measure PPE?
Cost model
Revaluation model - gains recognised as OCI
When is depreciation calculated?
At the end of each year from when the asset becomes available for use
Can reserve transfer excess depn
What is the double entry for impairment?
Impairment Amount = Carrying value - Recoverable amount
Dr Other Comprehensive Income/reval surplus
Dr Impairment Expense or P&L
Cr Carrying amount of asset
What are the rules for revalued assets?
Appear under Oher Comprehensive Income
Appear in statement of changes in equity
Not recognised in P&L
How is depreciation calculated for revalued assets and how much can be transferred?
(Revalued amount - residual value)/ remainder of useful life
Can transfer excess from revaluation surplus to retained earnings
revalued depn - historic cost depn
What is the journal entry for revaluation?
Dr building - cost/valuation (new-old)
Dr building - accumulated depn
Cr revaluation surplus (OCI)
What is the revaluation surplus?
Cost/valuation + accumulated depreciation
How is a revaluation gain/loss calculated?
New asset value - carrying amount at end of prev year
How do we know if an impairment loss has occurred?
Carrying amount > recoverable amount
How is recoverable amount calculated?
The higher of value in use, and fair value - cost of disposal
What are the indicators of impairment?
Decline in market value, new tech, increase in interest rates, change in gov policy, obsolete, performance worse
What is a stranded asset?
Assets experiencing unexpected/early write-downs, devaluations or turned to liabilities
When should an asset be classified as held for sale?
If entity intends to recover carrying amount through sale
What are the criteria to meet to be an asset held for sale? (SALE)
Seeking buyer
Available for sale
Likely to be sold
Expected to sell in 12 months
What happens once an asset is reclassified as held for sale?
Shown separately under current assets
Valued at lower of carrying amount and fair value - cost of disposal
Not depreciated
What is the journal entry to record classification as held for sale under the cost model?
Dr accumulated depn
Dr NCA held for sale
Dr P&L (balancing figure)
Cr cost
What is the journal entry to record classification as held for sale under the revaluation model?
Dr NCA held for sale (fair value - cost to dispose)
Dr P&L (cost of disposal)
Dr Revaluation surplus
Cr PPE at revaluation
What does it mean for an asset to be abandoned?
There will be no sale proceeds so recovery of carrying amounts will be through continued use
When are government grants recognised?
When there is reasonable assurance that the entity will comply with conditions of the grant and will receive the grant
How are government grants treated?
Assets: released to P&L over useful life
Income: released to P&L over periods costs of meeting conditions are incurred
How can government grants be presented?
Assets: Deferred income or deduction in carrying amount
Income: Credit in P&L or deduction from expense
What is a qualifying asset?
Asset that takes a substantial amount of time to prepare for its intended use or sale
When are borrowing costs capitalised?
When directly attributable to qualifying asset production
When expenditure incurred
Ceases when asset activities complete
