Chapter 5

Question 1

Define property, plant and equipment

Answer 1

Tangible assets that are held for use and that are expected to be used during more than one period

Question 2

Define carried amount

Answer 2

The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses.

Question 3

Recognition conditions of PPE

Answer 3

Provides probable future economic benefit

Can be measured reliably

Question 4

What is the cost should be recognised of a self-constructed asset? If the company produces the same asset for sale

Answer 4

The asset cost will usually be the same as the cost of constructing an asset for sale excluding any profit elements.

Question 5

What is the cost model?

Answer 5

Initial cost minus any accumulated depreciation and accumulated impairment losses

Question 6

What is the revaluation model?

Answer 6

The asset is revalued and the amount consists of the assets fair value less any depreciation and impairment

Question 7

What is the accounting for initial revaluation gains and losses

Answer 7

Gains: initially they are credited to revaluation reserves as unrealised profit

Losses: An expense in the income statement

Question 8

What is the accounting for subsequent revaluation gains and losses

Answer 8

Gains: Recorded as income in the income statement up to the value of previous losses

Losses: Debited in the revaluation account up to the value of previous gains

Question 9

Define depreciation

Answer 9

The systematic allocation of the depreciable amount of an asset over its useful life

Question 10

What is IAS23?

Answer 10

Borrowing costs

This standard allows the capitalisation of interest from loans that were use in acquisition of assets such as PPE

Question 11

What is IAS20 Accounting for government Grants and Disclosure of Government Assistance

Answer 11

Prescribes the accounting treatment of government grants

Government grants are defined as assistance by the government in the form of transfers if resources to an entity in return for past or future compliance

Question 12

What is IAS40?

Answer 12

Investment property

This standard looks at the treatment of property that was bought as an investment.

The 2 models used to calculate the value of the properties is the cost model and the fair value model

Only difference is that in the fair value model, gains and losses are recorded straight in the income statement