S1 - non current assets

Question 1

what is the asset definition test

Answer 1

controlled by entity
Past event
Future economic benefits

Question 2

what is PPE recognition

Answer 2

PPE recognition - IAS 16
tangible assets held by an entity for use int he production or supply of goods
Expected to be used during more than one period
Recognised if it is probable that future economic benefits will flow to the entity and the cost of the item can be measured reliably
Cost = purchase price, imports, non refundable tax, directly attributable transports, maintenance for use
Settlement discount is shown as other income on income statement and not included in PPE

Question 3

what is PPE depreciation

Answer 3

depreciable amount = cost - residual value
Land doesn’t depreciate
Straight line = net cost allocated over useful life
Reducing balance = % of net book value (unallocated cost)

Question 4

what are the accounting policies for PPE

Answer 4

Cost model: held at cost - accumulated depreciation and any accumulated impairment losses
Revaluation model: held at revalued amount - accumulated depreciation and any accumulated impairment losses

Question 5

what is the revaluation model

Answer 5

revalued at fair value: amount for which as asset could be exchanged between knowledgable and willing parties in an arms length transaction
Need to be performed regularly to ensure validity
If an asset is revalued, the entire related class of assts must be revalued

Question 6

what is the issue of revaluing

Answer 6

Costly
Effect on income statement - depreciation and loss on disposal
Effect on ratios
Taxation effect

Question 7

what are revaluation changes

Answer 7

Restate asset at revalued amount, remove acc dep, credit revaluation reserve (if value increases)
Can transfer excess depreciation between reserves: compare old and new depreciation rate and the difference debits to the revaluation reserve and credits the retained earnings
Decrease in market value - written off against revaluation reserve up to the value of its balance. Remained to the income statement as an impairment
Previously impaired asset may increase in market value - reverse previous impairment up to values previously written off and balance to revaluation reserve

Question 8

what are PPE disclosures

Answer 8

effective date of revaluation
Whether valuer was independent
Methods and significant assumptions used
Carrying amount that would have been recognised
Revaluation surplus including changes
Gross carrying amount, acc dep and impairment losses