IAS 16 Flashcards
According to IAS 16, PPE should be measured at cost at initial recognition which should include an estimate of dismantling and site restoration costs measured in accordance with [Blank-1] and a [Blank-2] should be created for the dismantling costs based on the [Blank-3] of the estimated future cash flow.
1 - IAS 37
2 - provision
3 - present value
Companies with [Blank-1] debt, [Blank-2] liquidity ratio and [Blank-3] cash flow ratio are more likely to perform upward revaluations of PPE by choosing the revaluation model.
1 - high
2 - low
3 - low
ACCORDING TO IAS 16, PPE MUST INTIALLY BE MEASURED AT COST WHICH INCLUDES [Blank-1] [Blank-2] [Blank-3]..
1 - purchase price
2 - directly attributable cost to acquisition
3 - an estimate of dismantling and site restoration costs
Depreciation, which is applicable to both cost and revaluation models, is defined as
the systematic allocation of depreciable amount of an asset over its useful life
If a PPE value is based on historical cost, the depreciation will be lower than it is at fair value, and it will show [Blank-1] profits and lead to payment of [Blank-2] dividends to shareholders.
1 - high
2 - high
Property, plant and equipment should be derecognised when it is [Blank-1] expected to generate future economic benefit or when it is [Blank-2] of.
1 - no longer
2 - disposed
IAS 16 states that The unwinding of discount for provision for dismatling cost initially capitalised on the acquisition of PPE will result in interest expense which will be recognised in SOPL every year until settled.
yes or no
no
IAS 16 states that The recognition of PPE depends on two criteria, both of which must be satisfied.
- It is probable that future economic benefits associated with the item will flow to the entity.
- The item’s cost can be measured reliably. This recognition criteria is consistent with the recognition criteria for Assets in the CONCEPTUAL FRAMEWORK OF ……….
2010
Repairs and maintenance expenditure should be capitalised as incurred, because it is not probable that there will be future economic benefits flowing from it, over and above the benefits flowing from the cost originally recognised when the item was first acquired.
Is the above statement correct?
No
The gain on disposal of PPE can be recognised to SOPL and presented as ……………….. and not as revenue.
other income
For the subsequent measurment of PPE, an entity shall choose either the cost model or the Fair Value model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment. Is this statment in compliance with IAS 16?
NO
According to IAS 16, large assets that require replacment parts at regular intervals and regular major inspections of an asset must be capitalised using the ………… approach
component
A new accountant has been reviewing a company’s financial reporting processes and has recommended that all purchases of property, plant and equipment below $500 should be written off to profit or loss. Is this in compliance with IAS 16?
No
WHICH OF THE FOLLOWING EXPENDITURE CAN BE CAPITALISED ON THE INITIAL MEASUREMENT OF PPE?
a.Costs of employee benefits arising directly from the construction or acquisition of the item of property, plant and equipment;
b.Costs of dismantling existing structures on the site before commencement of the project
c.Costs of opening a new facility
d.Costs of advertising and promotional activities
e.Administration and other general overhead costs.
[Blank-1] [Blank-2]
Note: Just fill in a, b,c,d or e in the blanks
a, b
As per IAS 16, PPE are tangible items that are: [Blank-1] [Blank-2].. (WRITE THE EXACT DEFINITION)
1 - held for use in production or supply of goods or services, for rental to others, or for administrative purposes
2 - expected to be used during more than one period
