Property, Plant, and Equipment - Cost Model Flashcards
What standard governs about property, plant, and equipment?
PAS 16
What is PPE?
- Held for use in the production or supply of goods or services, for rental to other, or for administrative purposes
- Expected to be used for more than one period
Nature of PPE
Tangible items
Used in business activities (owner-occupied)
For rental to others (except land and building)
Long-term asset (long-lived assets)
Recognition principle of PPE
- It is probable that future economic benefits associated with the item will flow to the entity
- The cost of the item can be measured reliably
Measurement principle of PPE
Initial - at cost
Subsequent - cost model or revaluation model
Measurement under cost model
Cost - acc. depreciation and acc. impairment losses
Items included in cost
Costs of purchase
Directly attributable costs to bring the asset to the location and condition for its intended use
Initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located
Costs of purchase comprises
Purchase price
Import duties and non-refundable purchase taxes
Directly attributable costs
costs of employee benefits costs of site preparation initial delivery and handling costs installation and assembly costs costs of testing (function) professional fees
Estimated costs of dismantlement, removal and restoration
When the item is acquired
Used for purposes other than to produce inventories
Acquisition of PPE
Cash purchase Credit purchase Exchange (including trade-in) Self-construction Donation Government grant Share-based payment Lease Business combination
Stated interest rate is realistic or at market rate
Face value
Stated interest rate is not realistic or not at market rate
Cash price or present value of payments
No stated interest rate
Cash price
Present value of payments
Exchange
Commercial substance
Fair value of the asset given up can be measured reliably
The entity is the payor or recipient if cash
