5 - NCA

PPE is initially recognised at ...?

at cost.

Subsequent expenditure on NCA may be capitalised if:

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.

The asset is depreciated over its useful economic life. The depreciation method and useful life of an asset should be reviewed at

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...?

separately.

Revaluation of PPE is optional. If one asset is revalued, all assets in that class...

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...

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...?

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...

from the revaluation surplus to retained earnings.

Government grants should not be recognised until...?

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...?

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:

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.

Borrowing costs definition.

Interest and other costs incurred when borrowing funds.

IAS 23 main principle.

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.

Property held to earn rentals or for capital appreciation or both.

Investment property is initially recognised at...

at cost.

Investment property. An entity can choose either of two models:

Cost model*. | Fair value model.

The fair value model recognises Investment Properties in the SPL at fair value. Gains and losses on revaluation are recognised in...?

in the SPL.

Intangible asset definition.

An identifiable | non-monetary asset | without physical substance.

An intangible asset is initially recognised at cost if:

it's Identifiable. | it's Controlled by the entity. | it will generate Probable future economic benefits. | the cost can be Measured reliably.

If an intangible does not meet the recognition criteria, then it should be charged to the ... as ...?

to the SPL as expenditure.

Intangible assets should be amortized over their...?

useful lives.

If it can be demonstrated that the useful life is indefinite then no amortisation should be charged, but...?

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...?

to an active market. But it is unlikely that active market for intangible assets exist.

Costs incurred during the research must be ...?

expensed as they are incurred.

Intangible assets. Costs incurred during development should be recognized as an asset if they meet following criteria:

Technically feasible project. | Resources for completion available. | Using or selling ability. | Completion ability. | Economic benefits ability. | Measuring of expenditure of project ability.

Amortisation over the useful life on the new product or process will commence once ...?

once the project is complete.

Impairment loss definition.

The amount by which the CA of an asset or CGU* exceeds its recoverable amount.

If the carrying amount exceeds the recoverable amount the asset is impaired and must be ...?

written down.

Recoverable amount - greater of...

FV less costs to sell | or Value-in-use

Impairment reviews are required where there is...

an indicator of impairment.

Internal Indicators of impairment examples:

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.

External Indicators of impairment examples:

Competitor actions.| Market values of asset falling.| Increasing interest rates*.

Cash-generating units definition.

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 ...?

on a CGU.

Impairment losses on a CGU are allocated in the following order:

1. Goodwill. | 2. Remaining assets in proportion to carrying amounts.

Recognition of impairment losses. Assets held at cost: The amount of the impairment is charged to...?

... to the SPL.

Revalued assets: The impairment is charged to

to OCI to reverse any previous surplus on that asset | with any excess charged to profit or loss.

Asset held for sale short definition:

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:

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.

The asset classified as held for sale should be measured at...?

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.

to fair value.

The asset classified as held for sale will be presented as ... asset.

as current asset.

Depreciation of asset held for sale rule.

No further depreciation is charged.