Non Current Assets Flashcards
PPE, borrowing costs, investment property, intangible
When should we bring PPE into the accounts?
- it is RELEVANT to do so and in doing so
- the item is FAITHFULLY REPRESENTED
- Meets the definition of an Asset (PPE - a right that has the potential to produce economic benefit)
What gets included in ‘Cost’?
- Directly attributable costs to get it to work and where it needs to be.
- Dismantling costs at NPV
- Borrowing costs
eg. purchase price, site preparation, delivery and handling, installation, related professional fees for architects and engineers, freight,
What is excluded from ‘Cost’?
maintenance, training staff, early settlement discounts, advertising cost
trade discount is removed from cost
Borrowing costs?
..costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset.
Other borrowing costs are recognised as an expense.
What is an investment property?
A building (or land) owned but not used - just an investment.
The building is not used it just makes cash by:
1. its FV going up (capital appreciation) or
2. from rental income
Intangible asset?
..an identifiable non-monetary asset without physical substance, such as a licence, patent or trademark.
The three critical attributes of an intangible asset are:
- Identifiable (SEPARABLE AND ARISES FROM CONTRACTUAL OR OTHER LEGAL RIGHTS)
- Control (power to obtain benefits from the asset)
- Future economic benefits
When do we recognise an asset?
- can be measured reliably (measurable)
- expect future benefits (probable)
if test not met, then expense
R&D - expense or capitalise?
always expense!
no benefit yet!
development phase - expense or capitalise?
Capitalise only if:
1. technically feasible
2. commercially viable
3. completion intended
4. show how benefits generated
Software - expense or capitalise?
if purchased - capitalise.
if internally generated - test if meets the criteria for intangible asset
internally generated brands - expense or capitalise?
always expense!
how measure how much they cost
Goodwill - expense or capitalise?
expense!
no reliable measure until company is sold - then capitalise
start up costs - expense or capitalise?
always expense!
the business is not making any money yet
training costs - expense or capitalise?
always expense!
staff not controlled by us
