Flashcards
SBR - Chapter 3
Cards in this deck (50)
- 1Property, plant and equipment(a) Held by an entity for use in the production or supply of goods or services, for rental to others, or for administrative purposes
(b) Expected to be used during more than one period - 2Recognition(a) It is probable that future economic benefits associated with the item will flow to the entity
(b) The cost of the item can be measured reliably
These recognition criteria apply to subsequent expenditure as well as costs incurred initially - 3Smaller items such as toolsclassified as consumables and expensed
rather than capitalised. Where they are capitalised, they are usually aggregated
and treated as one. - 4Large and complex assets should be broken downinto composite parts and
each depreciated separately, if the parts have differing patterns of benefits
and the cost of each is significant. Expenditure to renew individual parts can then
be capitalised - 5Measurement at recognitionProperty, plant and equipment should initially be measured at cost, which includes
Purchase price, less trade discount/rebate +
Directly attributable costs of bringing the asset to working condition for intended use +
Finance costs: capitalised for qualifying assets (IAS 23) - 6Cost modelCarry asset at cost less depreciation and any accumulated impairment losses
- 7Revaluation modelCarry asset at revalued amount, ie fair value less subsequent accumulated depreciation and any accumulated impairment losse
- 8revaluation model is applied ((a) Revaluations must be carried out regularly, depending on volatility.
(b) The asset should be revalued to fair value, using the fair value hierarchy in IFRS 13.
(c) If one asset is revalued, so must be the whole of the rest of the class of assets at the same time.
(d) An increase in value is credited to other comprehensive income (OCI) (and the revaluation
surplus in equity).
(e) A decrease is an expense in profit or loss after cancelling a previous revaluation surplus. - 9Depreciation(a) Depreciation is based on the carrying amount in the statement of financial position. It must be determined separately for each significant part of an item.
(b) Excess over historical cost depreciation can be transferred to realised earnings through reserves.
(c) The residu al value and useful life of an asset, as well as the depreciation method, must be reviewed at least at each financial year end. Changes are treated as changes in accounting estimates and are accounted for prospectively as adjustments to future depreciation.
(d) Depreciation of an item does not cease when it becomes temporarily idle or is retir from active use and held for disposal, unless it is classified as held for sale under IFRS 5 - 10Gains or losses are calculatedby comparing net proceeds with the carrying amount of the asset and are recognised as income/expense in profit or loss
- 11revalued asset is disposed ofany revaluation surplus may be transferred directly to retained earnings. Alternatively, it may be left in equity under the heading revaluation surplus.
- 12Exchanges of assetsmeasured at fair value (IAS 16: para. 24), unless the exchange transaction lacks commercial substance or the fair value of neither of the assets exchanged can be measured reliably.
- 13If an asset's value in the financial statements is higher than its realistic value, measured as its 'recoverable amount',', the asset is judged to have suffered an impairment lossIt should therefore be reduced in value, by the amount of the impairment loss. The amount of the impairment loss should be written off against profit immediately.
- 14Recoverable Amount Higher of⦁ Fair value less costs of disposal
⦁ Value in Use - 15Fair value less costs of disposalthe price that would be received to sell the asset in an orderly transaction between market participants at the measurement date (IFRS 13 definition of fair value), less the di rect incremental costs attributable to the disposal of the asset (IAS 36: para. 6).
- 16Value in use of an asset:measured as the present value of estimated future cash flows (inflows minus outflows) generated by the asset, including its estimated net disposal value (if any) at the end of its expected useful life.
- 17Cash-generating unitsCash-generating unit (IAS 36): the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets
- 18Allocating goodwill to cash-generating unitsGoodwill does not generate independent cash flows and therefore its recoverable amount as an individual asset cannot be determined. It is therefore allocated to the cash-generating unit (CGU) to which it belongs and the CGU tested for impairment.
- 19Goodwill that cannot be allocated to a CGU on a non-arbitrary basisis allocated to the group of CGUs to which it relates.
- 20Corporate assetsare group or divisional assets such as a head office building or a research centre. Corporate assets do not generate cash inflows independently from other assets; hence their carrying amount cannot be fully attributed to a cash-generating unit under review
- 21Corporate assets are treated in a similar way to goodwill.Corporate assets are treated in a similar way to goodwill.
- 22An impairment loss should be recognised immediately.An impairment loss should be recognised immediately.
- 23The asset's carrying amount should be reduced to its recoverable amount, and for:Assets carried at historical cost: The impairment loss is charged to profit or loss.
Revalued assets: The impairment loss should be treated under the appropriate rules of the applicable IFRS. - 24Test of individual CGUsTest the individual CGUs (including allocated goodwill and any portion of the carrying
amount of corporate assets that can be allocated on a reasonable and consistent basis). - 25Test of group of CGUsTest the smallest group of CGUs that includes the CGU under review and to which the
goodwill can be allocated/a portion of the carrying amount of corporate assets can be
allocated on a reasonable and consistent basis - 26Intangible asset:an identifiable non-monetary asset without physical substance. The asset must be:
(a) Controlled by the entity as a result of events in the past; and
(b) Something from which the entity expects future economic benefits to flow. - 27An asset is identifiable if:(a) It is separable, or
(b) It arises from contractual/legal rights. - 28Recognition(a) It is probable that future economic benefits that are attributable to the asset will flow to the entity.
(b) The cost of the asset can be measured reliably - 29During the research phase,, all expenditure is recognised as an expense.
- 30During the development phase,internally generated intangible assets that meet all of the following criteria must be capitalised:
Probable future economic benefits
• Intention to complete and use/sell asset
• Resources adequate and available to complete and use/sell asset
• Ability to use/sell the asset
• Technical feasibility of completing asset for use/sale
• Expenditure can be measured reliably - 31expenses., start-up, training, advertising, promotional, relocation and reorganisation costs
- 32Investment property (IAS 40):property (land or building – or part of a building – or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, rather than for
- 33RecognitionInvestment property is recognised when it is probable that future economic benefits will flow to the entity and the cost can be measured reliably.
- 34Measurement at recognitionInvestment property should be measured initially at cost, including directly attributable expenditure and transaction costs (IAS 40: para. 21)
- 35Fair value modelAny change in fair value reported in profit or loss, not depreciated
- 36Cost modelAs cost model of IAS 16 – unless held for sale (IFRS 5) or leased (IFRS 16)
- 37Transfer from investment property to owner-occupied or inventoriesCost for subsequent accounting is fair value at date of change of use
Apply IAS 16, IAS 2 or IFRS 16 as appropriate after date of change of use - 38Transfer from owner-occupied to investment propertyApply IAS 16 or IFRS 16 (for property held by a lessee as right-of-use asset) up to date of change of use At date of change, property revalued to fair value
• At date of change, any difference between the carrying amount under IAS 16 or IFRS 16 and its fair value is treated as a revaluation under IAS 16 - 39Transfer from investment property to owner-occupied or inventoriesCost for subsequent accounting is fair value at date of change of use
Apply IAS 16, IAS 2 or IFRS 16 as appropriate after date of change of use - 40DisposalsAny gain or loss on disposal of investment property is the difference between the net disposal
proceeds and the carrying amount of the asset. It should be recognised as income or expense
in profit or loss - 41) Grants are not recognised untilthere is reasonable assurance that the conditions will be complied with and the grant will be received
- 42) Government grants are recognisedin profit or loss so as to match them with the related costs they are intended to compensate on a systematic basis
- 43) Government grants relating to assets can be presented either ass deferred income or by deducting the grant in calculating the carrying amount of the asset
- 44Grants relating to income may either be shown separately or as part of 'other income' or alternatively deducted from the related expense
- 45A government grant that becomes repayable is accounted for as a change in accountingestimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (
- 46Repayments of grants relating to income are applied firstagainst any unamortised deferred credit and then in profit or loss.
- 47Repayments of grants relating to assets are recorded by increasingthe carrying amount of the asset or reducing the deferred income balance. Any resultant cumulative extra depreciation is recognised in profit or loss immediately.
- 48Borrowing costs (IAS 23)Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. (IAS 23: para. 26)
- 498.1 Recognition(a) The entity controls the asset as a result of past events;
(b) It is probable that future economic benefits associated with the asset will flow to the
entity; and
(c) The fair value or cost of the asset can be measured reliably. - 508.2 MeasurementBiological assets are measured both on initial recognition and at the end of each reporting period at fair value less costs to sell (IAS 41: para. 12). Agricultural produce at the point of harvest is also measured at fair value less costs to sell (IAS 41: para. 13).
The fair value less costs to sell of agricultural produce harvested becomes its cost under IAS 2. After harvest, the agricultural produce is measured at the lower of cost and net realisable value in
accordance with IAS 2. Changes in fair value less costs to sell are recognised in profit or loss (IAS 41: para. 26). Where fair value cannot be measured reliably, biological assets are measured at cost less accumulated depreciation and impairment losses (IAS 41: para. 30)
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- Flashcards on SBR - Chapter 3, created by D A on 30/11/2020.
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