IAS 16 PPE

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PPE should initially be showed at Cost in the SOFP.

COST = (Asset's price, import duties, delivery charges, costs of preparing the site, installation costs)

After acquisition, company should show the carrying amount of the assets at either:

1) Cost - (accumulated depreciation + Impairment loss)

2) Revaluation based on fair value less subsequent depreciation and impairment losses

Fair value is the amount at which an asset could be exchanged between knowledgeable parties.

Depreciation: Apportioning the cost of an asset over its useful life

Residual Value = selling price - any disposal costs

Methods of Depreciation:

1) Straight line, charging a constant annual amount over the life of asset

2) Reducing Balance, charging a decreasing annual amount over the life of the asset

3) Revaluation, charging the difference between the value of asset start of year and value of asset end of year, plus any addition to the asset during year

Only change the method of depreciation if it gives a more fairer view, and it showed be shown as a note to the financial statements, any change must be a permanent change.

Derecogniion occurs when an asset is disposed off or when it is unable to yield any economic benefits. It will no longer be shown at the SOFP and any profit/loss on disposal will be shown in the income statement.