对外财务报告决策-6 非流动资产和减值 WIP

2. The units-of-output method allocates cost based on production. As production varies, so will the depreciation expense.
Depreciation = (Cost – residual value) / Output
Cost includes all costs necessary to bring the asset to working condition for its intended use which includes: • • • Purchase price of an asset (less any trade discount); and Directly attributable costs such as cost of site preparation, initial delivery and handling costs, installation and testing costs and professional fees; and Interest (borrowing costs) attributable to the acquisition, construction, or production of a PPE asset constructed for internal use is included in its initial cost;
CMA Part 1 External Financial Reporting Decisions
Non-current Assets and Impairment
Purchase of Property, Plant and Equipment
Items of property, plant, and equipment should be recognized as assets when it is probable that: 1. it is probable that the future economic benefits associated with the asset will flow to the entity, and
Purchase of Intangible Assets
Research and development (R&D) costs must be expensed as incurred and are thus never capitalized. Dr. Research and development expense Cr. Cash
Cost Model. The asset is carried at cost less accumulated depreciation and impairment. (US GAAP)
Fair Value Model. The asset is carried at a revalued amount, being its fair value at the date. (Optional in IFRS)
Depreciation of Property, Plant and Equipment
Depreciation is the process of systematically and rationally allocating the depreciable base of a tangible capital asset over its expected useful life. The periodic depreciation expense is recognized in the income statement. Depreciation begins when the asset is available for use and continues until the asset is derecognized, even if it is idle. Dr. Depreciation expense Cr. Property, plant and equipment – Accumulated depreciation
Property, Plant and Equipment in IFRS
Revaluation Model If a revaluation results in an increase in value, it should be credited to other comprehensive income unless it represents the reversal of a revaluation decrease of the same asset previously recognized as an expense, in which case it should be recognized as income. A decrease arising as a result of a revaluation should be recognized as an expense to the extent that it exceeds any amount previously credited to the revaluation surplus relating to the same asset.
Dr. Cash Dr. PPE – Accumulated depreciation Cr. PPE Cr. Gain on disposal (or Cr. Loss on disposal)
Property, Plant and Equipment in IFRS
IAS 16 Property, plant and equipment permits two accounting models: Cost Model. The asset is carried at cost less accumulated depreciation and impairment. (US GAAP) Revaluation Model. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation and impairment, provided that fair value can be measured reliably. (Optional in IFRS)
2. the cost of the asset can be measured reliably;
Purchase of Property, plant and equipment Dr. Property, plant and equipment Cr. Cash
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Purchase of Property, Plant and Equipment
Depreciation of Property, Plant and Equipment
1. Straight-line depreciation is the simplest method because an equal amount of depreciation is charged to each period of the asset’s useful life. Depreciation = (Cost – residual value) / Useful economic life
Depreciation of Property, Plant and Equipment
3. Accelerated depreciation methods are time-based. They result in decreasing depreciation charges over the life of the asset. The two major time-based methods are declining balance and sum-of-digits. Depreciation (declining balance) = Carrying amount × Declining-balance percentage
Property, Plant and Equipment in IFRS
Under IAS 40 investment property, investment property is property (land, building, part of a building, or both) held by the owner or by the lessee under a finance lease to earn rental income or for capital appreciation or both. IAS 40 permits two accounting models:
Purchase of Intangible Assets
An intangible asset is an identifiable, nonmonetary asset that lacks physical substance. Examples of intangible assets include licenses, patents, copyrights, franchises, and trademarks. Externally acquired intangible assets (other than goodwill) are initially recorded at acquisition cost plus any additional costs, such as legal fees. Dr. Intangible assets Cr. Cash
Disposal of Property, Plant and Equipment
When an item of PPE is sold, the gain or loss on disposal is the difference between the net proceeds and the carrying amount of the asset. Depreciation (if any) is recognized to the date of sale, the carrying amount is removed from the books, the proceeds are recorded, and any gain or loss is recognized.
Property, Plant and Equipment in IFRS
Fair Value Model • • A gain or loss arising from a change in the fair value of investment property must be recognized in profit or loss for the period in which it arises. Investment property that is accounted for according to the fair value model is not depreciated.