PPE

Question 1

List the three rules for the revaluation model

Answer 1

• Revalue all Assets
• Revalue to FV (IFRS 13)
• Revalue at sufficient regularity

Question 2

What is the definition of PPE?

Answer 2

Tangible items that are held by an entity for use in the production or supply of goods or services and are expected to be used during more than one period

Question 3

What 4 things cannot be included in cost?

Answer 3

• Training
• Start up costs
• Abnormal costs
• General admin overheads

Question 4

What can be included in costs?

Answer 4

Costs bringing the asset to its current location and condition

Question 5

What standard does dismantling come under and how would you account for it?

Answer 5

IAS 37 - Provisions

Dr Asset, Cr Provisions at the discounted amount

Question 6

Is the capitalisation of finance costs (including interest) required for a qualifying assets?

Answer 6

Yes

Question 7

If it is direct borrowing, what do you net off?

Answer 7

Interest expense less interest earned

Question 8

If it is multiple borrowings, what do you use?

Answer 8

Weighted average cost

Question 9

What do you call qualifying assets to do with construction?

Answer 9

Asset under construction

Question 10

How should PPE be measured initially ?

Answer 10

Cost

Question 11

What does IAS 23 Borrowing Costs state?

Answer 11

Capitalisation of finance costs including interest is required for any qualifying asset

Question 12

When does capitalisation of borrowing costs occur?

Answer 12

• Expenditure for the asset are being incurred
• Borrowing Costs are being incurred
• AND construction activities are in progress

Question 13

When is capitalisation suspended?

Answer 13

When development is interrupted

Question 14

When is capitalisation ceased?

Answer 14

Substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete

Question 15

When are subsequent costs capitalised?

Answer 15

When the cost of the replacement is incurred, providing the recognition criteria are met.

They should be treated separately for the calculation of depreciation

Question 16

What type of costs are not capitalised and where do they get accounted for?

Answer 16

Day to day service costs - expensed to the P/L

Question 17

How can PPE be measured after initial recognition?

Answer 17

Choice of Cost or revaluation model

Question 18

Define fair value

Answer 18

IFRS 13 - the price that’s would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 19

Where is excess depreciation accounted for?

Answer 19

Transferred from the revaluation surplus to retained earnings

Question 20

On the disposal of an asset, where does the remaining balance of the excess depreciation go?

Answer 20

From revaluation surplus to retained earnings

Question 21

What should the depreciation method reflect?

Answer 21

The expected pattern of consumption of the asset’s future economic benefits

Question 22

If an asset have one or more components with different useful lives, how do you depreciate?

Answer 22

Separately

Question 23

How often should the useful life and depreciation method for PPE be reviewed?

Answer 23

At least at each financial year end.