5 - NCA

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PPE is initially recognised at ...?
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at cost.
Subsequent expenditure on NCA may be capitalised if:
3 + examples
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Enhances the economic benefits of the asset. | Replaces part of an asset that has been separately depreciated, and has been fully depreciated. | Replaces economic benefits previously consumed.
For example adding a new wing to a building. | A furnace that requires new linings. | A major inspection of aircraft.
The asset is depreciated over its useful economic life. The depreciation method and useful life of an asset should be reviewed at
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at the end of each year.
If an asset has parts with different lives (like a building with flat roof), the component parts of the asset should be depreciated...?
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separately.
Revaluation of PPE is optional. If one asset is revalued, all assets in that class...
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must be revalued.
PPE revaluation gains are credited to OCI unless the gain reverses a previous revaluation loss of the same asset previously recognised in...
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in profit or loss.
PPE revaluation losses are charged to the SPL unless the loss relates to a previous revaluation surplus, in which case it should be charged to...?
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to OCI.
An entity may choose to make a reserves transfer for the excess PPE depreciation arising from a revaluation. This is taken from ... to...
2
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from the revaluation surplus to retained earnings.
Government grants should not be recognised until...?
2
IAS 20: Accounting for Government grants and Disclosure of government assistance.
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until there is reasonable assurance that the grant will be received | and that conditions will be complied with.
Income grants given to subsidise the expenditure should be matched to the...?
IAS 20: Accounting for Government grants and Disclosure of government assistance.
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to the related costs.
Government grants for purchases of NCA should be recognized over the expected useful lives of the related assets. There are two acceptable accounting policies:
2
IAS 20: Accounting for Government grants and Disclosure of government assistance.
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Deduct the grant from the cost of the asset and depreciate the net cost. | Treat the grant as deferred income and release to the SPL over the life of the asset.
'deferred income'
Borrowing costs definition.
IAS 23
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Interest and other costs incurred when borrowing funds.
IAS 23 main principle.
IAS 23 Borrowing Costs
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Entities MUST capitalise borrowing costs that are directly attributable to the acquisition, construction and production of an asset that take a substantial amount of time to get ready for use.
Investment property definition.
IAS 40: Investment property.
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Property held to earn rentals or for capital appreciation or both.
Investment property is initially recognised at...
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at cost.
Investment property. An entity can choose either of two models:
IAS 40
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Cost model*. | Fair value model.
*cost less depreciation
The fair value model recognises Investment Properties in the SPL at fair value. Gains and losses on revaluation are recognised in...?
IAS 40
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in the SPL.
Intangible asset definition.
3cz
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An identifiable | non-monetary asset | without physical substance.
An intangible asset is initially recognised at cost if:
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it's Identifiable. | it's Controlled by the entity. | it will generate Probable future economic benefits. | the cost can be Measured reliably.
IC PM
If an intangible does not meet the recognition criteria, then it should be charged to the ... as ...?
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to the SPL as expenditure.
Intangible assets should be amortized over their...?
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useful lives.
If it can be demonstrated that the useful life is indefinite then no amortisation should be charged, but...?
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but an annual impairment review must be carried out.
Intangible assets can be revalued but only if fair values can be determined with reference to...?
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to an active market. But it is unlikely that active market for intangible assets exist.
Costs incurred during the research must be ...?
IAS 38: Intangible assets.
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expensed as they are incurred.
Intangible assets. Costs incurred during development should be recognized as an asset if they meet following criteria:
IAS 38
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Technically feasible project. | Resources for completion available. | Using or selling ability. | Completion ability. | Economic benefits ability. | Measuring of expenditure of project ability.
IA TRUC-M
The entity has adequate technical, financial and other resources to complete the project. | The entity is able to use or sell the asset. | The asset will generate future economic benefits. | The expenditure on the project can be reliably measured.
Amortisation over the useful life on the new product or process will commence once ...?
IAS 38: Intangible assets.
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once the project is complete.
Impairment loss definition.
IAS 36: Impairment of assets
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The amount by which the CA of an asset or CGU* exceeds its recoverable amount.
*cash-generating unit
recoverable amount is the HIGHER of: FV less costs to sell and the Value-in-use.
If the carrying amount exceeds the recoverable amount the asset is impaired and must be ...?
IAS 36: Impairment of assets
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written down.
Recoverable amount - greater of...
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FV less costs to sell | or Value-in-use
VIU - Present value of future CFs from continued use of the asset.
Impairment reviews are required where there is...
IAS 36: Impairment of assets.
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an indicator of impairment.
Internal Indicators of impairment examples:
4
IAS 36: Impairment of assets.
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Physical damage to the asset. | Idle or obsolete assets. | Management committed to REORGANISATION of the business. | Operating losses in the business where the assets are used.
PhIRO
External Indicators of impairment examples:
3
IAS 36: Impairment of assets.
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Competitor actions.| Market values of asset falling.| Increasing interest rates*.
*Because this reduces the value-in-use.
Cash-generating units definition.
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The smallest identifiable group of assets that generates independent cash inflow.
Individual asset may not generate a distinguishable cash flow. In this case the impairment calculation should be based on ...?
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on a CGU.
Impairment losses on a CGU are allocated in the following order:
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1. Goodwill. | 2. Remaining assets in proportion to carrying amounts.
No asset can be written down below the higher of fair value less costs to sell, value in use and zero.
Recognition of impairment losses. Assets held at cost: The amount of the impairment is charged to...?
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... to the SPL.
Revalued assets: The impairment is charged to
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to OCI to reverse any previous surplus on that asset | with any excess charged to profit or loss.
Asset held for sale short definition:
IFRS 5
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Asset that its CA will be recovered principally through a sales transaction, not the value-in-use.
To be classified as held for sale, the following criteria must be met:
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IFRS 5 - NCA held for sale and discontinued operations.
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management must be Committed to the sale. | the asset must be Available for sale in the present condition. | the asset should be actively Marketed at a reasonable price. | the sale must be highly Probable. | the sale must be expected within 1 year.
Camp-1
The asset classified as held for sale should be measured at...?
IFRS 5
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at the lower of CA and FV less costs to sell.
If the asset is measured using a revaluation model then it should be revalued to ... before being classified as held for sale.
IFRS 5
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to fair value.
The asset classified as held for sale will be presented as ... asset.
CA/NCA
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as current asset.
Depreciation of asset held for sale rule.
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No further depreciation is charged.

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