IAS 16 provides guidance on accounting for property, plant and equipment. It does not apply to biological assets related to agricultural activity or mineral rights and reserves, but does apply to property, plant and equipment used to develop these assets. Property, plant and equipment are tangible assets held for use in production, rental, or administration that are expected to be used for more than one period. Cost includes purchase price and costs to bring the asset to location and condition for use. Recognition requires probable future benefits and reliably measurable cost. Subsequent costs are recognized as an asset when they meet the same criteria. Examples provided include revaluation and depreciation calculation.
IAS 16 provides guidance on accounting for property, plant and equipment. It does not apply to biological assets related to agricultural activity or mineral rights and reserves, but does apply to property, plant and equipment used to develop these assets. Property, plant and equipment are tangible assets held for use in production, rental, or administration that are expected to be used for more than one period. Cost includes purchase price and costs to bring the asset to location and condition for use. Recognition requires probable future benefits and reliably measurable cost. Subsequent costs are recognized as an asset when they meet the same criteria. Examples provided include revaluation and depreciation calculation.
IAS 16 provides guidance on accounting for property, plant and equipment. It does not apply to biological assets related to agricultural activity or mineral rights and reserves, but does apply to property, plant and equipment used to develop these assets. Property, plant and equipment are tangible assets held for use in production, rental, or administration that are expected to be used for more than one period. Cost includes purchase price and costs to bring the asset to location and condition for use. Recognition requires probable future benefits and reliably measurable cost. Subsequent costs are recognized as an asset when they meet the same criteria. Examples provided include revaluation and depreciation calculation.
IAS 16 provides guidance on accounting for property, plant and equipment. It does not apply to biological assets related to agricultural activity or mineral rights and reserves, but does apply to property, plant and equipment used to develop these assets. Property, plant and equipment are tangible assets held for use in production, rental, or administration that are expected to be used for more than one period. Cost includes purchase price and costs to bring the asset to location and condition for use. Recognition requires probable future benefits and reliably measurable cost. Subsequent costs are recognized as an asset when they meet the same criteria. Examples provided include revaluation and depreciation calculation.
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Tangible non-current assets
Scope
IAS 16 does not apply to the following.
a) Biological assets related to agricultural activity, apart from bearer biological assets (see below) b) Mineral rights and mineral reserves, such as oil, gas and other non- regenerative resources However, the standard applies to property, plant and equipment used to develop these assets. Definition 1. Property, plant and equipment are tangible assets that: a) Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes b) Are expected to be used during more than one period 2. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction. 3. Residual value is the net amount which the entity expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal. 4. Entity specific value is the present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life, or expects to incur when settling a liability. Definition (cont.) 5. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 6. Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses. 7. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. Recognition The recognition of property, plant and equipment depends on two criteria: a) It is probable that future economic benefits associated with the asset will flow to the entity b) The cost of the asset to the entity can be measured reliably Costs Subsequent to Acquisition
Major Types of Expenditures
Additions. Increase or extension of existing assets. Improvements and Replacements. Substitution of a better or similar asset for an existing one. Rearrangement and Reorganization. Movement of assets from one location to another. Repairs. Expenditures that maintain assets in condition for operation.
LO 4 Costs Subsequent to Acquisition
In determining how costs should be allocated subsequent to acquisition,
companies follow the same criteria used to determine the initial cost of property, plant, and equipment. They recognize costs as an asset when the costs can be measured reliably and it is probable that the company will obtain future economic benefits. LO 4 Examples • Revaluation: 1.8-1.10 page 36-37 • Depreciation: 1.11.2 page 37-38 IAS 40 : Investment Property IAS 23: Borrowing Cost
Definition:
Borrowing costs. Interest and other costs incurred by an entity in connection
with the borrowing of funds. Qualifying asset. An asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Question 1 You acquired a property on 1 January 20X1 for $250,000, being $200,000 for the building and $50,000 for the land. The building was judged to have a useful life of 50 years. On 1 January 20X6 the property was independently valued which resulted in an increase of $100,000 to the carrying amount of the building and $50,000 to the carrying amount of the land. The useful life is unchanged. What is the depreciation charge for the year ended 31 December 20X6? Question 2 Which of the following will be treated as part of the cost of inventories? i. Import duties on raw materials ii. Labour involved in production iii. Distribution costs iv. Fixed production overheads v. Storage costs of finished goods vi. Cost of wasted materials A i,ii,vi B ii, iv, v C iii, iv, vi D i, ii, iv Explain!
