IAS 16

Question 1

Purpose of IAS 16

Answer 1

Establishes principles for recognising PPE as assets
Measuring carrying amounts
Impairment losses recognsied in relation to them

Question 2

What is PPE?

Answer 2

Tangible items used in production or supply of goods or services, rental to others, adminsitrative purposes

Question 3

Useful life for PPE?

Answer 3

More than one period

Question 4

What other assets does IAS 16 include?

Answer 4

Bearer plants related to agricultural activities

Question 5

When is cost of asset recognised?

Answer 5

Probable that future economic benefits associated will flow into the entity

Cost of item measured reliably

Question 6

Measuring an asset (first step)

Answer 6

Purchase price & purchase related costs

Question 7

Measuring an asset (second step)

Answer 7

Costs attributable to bringing asset to location and condition necessary for it to be capable of operating in manner intended by management

Question 8

Measuring an asset (third step)

Answer 8

Costs of dismantling and removing item and restoring the site it’s located on

Excludes inventories related to that period

Question 9

What happens after recognition of an asset?

Answer 9

Use cost model or revaluation model for entire class of PPE

Question 10

Cost model calculation?

Answer 10

Cost - accumulated depreciation - accumulated impairment losses

Question 11

Revaluation model calculation?

Answer 11

Fair value - accumulated depreciation - accumulated impairment losses

Question 12

Revaluation increases and decreases recognised in?

Answer 12

Recognised in OCI and accumulated in equity

Question 13

What is depreciation?

Answer 13

Systematic allocation over useful life

Question 14

How is depreciation recognised?

Answer 14

In SPL unless it is included in carrying amonut of another asset

Question 15

Consistent policy is used for?

Answer 15

Each of the assets

Question 16

Depreciate revalued amount?

Answer 16

Revalued amount - depreciation over remaining life. Not original cost

Question 17

Reverse transfer for SCE

Answer 17

Depreciation for revalued amount - depreciation for original amount

Question 18

Other components of equity (revaluation increase) calculation? (Equity section in SFP)

Answer 18

Revaluation surplus - reserve transfer

Question 19

Directly attributable costs?

Answer 19

Conducting business in new location
Employee benefits
Initial delivery and handling
Professional fees

Question 20

Is land depreciated?

Answer 20

No

Question 21

Calculate accumulated depreciation?

Answer 21

(Initial cost / useful life) * number of periods

Question 22

If there is a change in useful life of an asset?

Answer 22

The new useful life is used

Question 23

Subsequent depreciation straight-line?

Answer 23

(Original cost / number of years). If no change in useful life

Question 24

Subsequent depreciation reducing balance?

Answer 24

(CV * percentage)

Question 25

Revaluation decrease double entry?

Answer 25

Credit PPE Debit Impairment OCI Debit Impairment SPL (B)

Question 26

Calculate reserve transfer?

Answer 26

Old depreciation expense - new depreciation expense

Question 27

Change in useful life treatment?

Answer 27

Adjust for prior years (e.g. if plant purchase was in 20X0 and in 20X2 useful life changed to 8 years. Years used in depreciation will be 8-2=6)

Question 28

Cost of an overhaul?

Answer 28

Added to the carrying amount

Question 29

How are unused materials treated?

Answer 29

Deducted from value of NCA

Question 30

Entire class of PPE?

Answer 30

Must use the same cost or revaluation model