Tangible assets Flashcards
What regulation do tangible assets fall under in IFRS?
IAS 16
What is an asset?
A resource controlled by an entity due to a past event & from which it can make a future economic benefit
PPE recognition criteria (IAS 16.7)
Future economic benefits are probable and cost can be measured in a reliable way
What is PPE?
Items held for production, supply of goods and services, rental to others, or admin purposes
How to value PPE at recognition? (IAS 16.15)
Cost of purchase
How to value PPE after recognition? (IAS 16.29)
- Cost model (IAS 16.30)
- revaluation model (IAS 16.31)
How to calculate the value of PPE at recognition?
Purchase price
+ import duties/non-refundable purchase taxes
- trade discounts or rebates
+ other directly attributable costs
+ estimated dismantlement costs
Expenses not recognized as PPE?
Opening a new facility (including ad campaign)
Introducing new product or service
Training staff
Administration and other overhead costs
(IAS 16.19)
Using or redeploying an item
Incidental operations
Costs incurred when construction is interrupted
(IAS 16.20)
What are the different depreciation methods?
Straight-line method
Diminishing balance method
Units of production method
How to calculate straight-line depreciation
(Cost - residual value)/useful life
How to calculate diminishing balance depreciation?
(Net book value - residual value)/useful life * 2
How to calculate units of production depreciation?
(cost - residual value)*(goods produced/total goods)
How to calculate impairment of assets (IAS 36.18)
Carrying amount - recoverable amount
How to find recoverable amount
You take the highest between value in use of fair value - costs
What to do when you have an impairment loss?
Recognize as an expense immediately, unless it’s at revaluated amount
Use new carrying amount to calculate depreciation
