Team 1
What does IAS 16 focus on?
Property, Plant and Equipment
Which depreciation method results in a constant charge throughout the useful life of an asset?
Straight-line method
Under IAS 38, what characterizes an intangible asset?
Identifiability and lack of physical substance
What does IAS 2 primarily regulate?
Inventory valuation
What is amortization applicable to?
Intangible assets
What determines if an asset is impaired under IAS 36?
Recoverable amount is less than carrying amount
When should subsequent costs of a non-current asset be capitalized?
If they enhance the benefits of the asset
What does 'value in use' refer to in impairment testing?
Present value of future cash flows from the asset
In the reducing balance method of depreciation, what happens to the depreciation charge over time?
It decreases each year
What does the term ‘recognition’ refer to in accounting standards?
Recording and reporting an item in financial statements
What is the main criterion for capitalising borrowing costs under IAS 23?
It must be a qualifying asset.
What is the definition of 'recoverable amount' as per IAS 36?
The higher of fair value less costs to sell or value in use
Which category of assets would NOT typically be considered a qualifying asset under IAS 23?
Assets readily available for sale upon purchase
What happens if an asset's recurrent value and fair value are both less than its carrying amount?
An impairment loss must be recorded
Where is Revaluation Surplus reflected in Statement of Profit and Loss of a company
Other Comprehensive Income
Accounting for Depreciation (Double Entry)
Dr Depreciation expense (P&L) X
Cr Accumulated depreciation (SFP) X
How is profit or loss determined during disposal of assets
Sale Proceeds - Carrying Amount at disposal date = Profit/Loss
Accounting for Revaluation Surplus for a depreciated asset (double entry)
Dr. Accumulated Depreciation
Dr. Non Current Asset
Cr. Revaluation Reserve
Accounting for Impairment loss for a non-depreciated asset (Double Entry)
Dr. SOPL expense a/c
Cr. Asset a/c
How is the capitalization of borrowing cost done for specific borrowings
Actual cost incurred/interest expense - Income on temporary investment
Leo purchased an asset at a cost of 50,000 on 1 April 20x2. The machine was sold for 13000 on 31 March 20x6. At that date, accumulated depreciation on the machine amounted to 34,000. What is the profit or loss on disposal of the asset
Loss on disposal Rs. 3000
bank loan for general borrowing at 8% pa 130,000. The company used 60,000 for the construction of building on 1 February 2024. What borrowing cost should be capitalized for the new building and what as expense
Capitalization rate = 10400/130,000 = 8%
Borrowing cost for the new building = 60,000*8%*11/12 = 4400
Expense = 400
Closing stock in the books worth $60000 includes a product which is damaged in rain (costing $10000) , which can be sold for 3000 after incurring an exp of $500. what is the value of closing stock in books?
Cost or NRV whichever is less
Cost = 10,000
Net Realizable value 3000-500 = 2500
Book value of Inventory = 60000 - (10000 + 2500) = 52,500
On 1st May 20X1, DEF took a loan of CU 1 000 000 from a bank at the annual interest rate of 5%. The purpose of this loan was to finance a construction of a production hall.
The construction started on 1 June 20X1. DEF temporarily invested CU 800 000 borrowed money during the months of June and July 20X1 at the rate of 2% p.a.
What borrowing cost can be capitalized in 20X1? (Assume all interest was paid).
On 1/1/2021, an asset was purchased for $5,00,000, useful life – 10 years. No scrap value. On 31/12/2022, an impairment review was done, fair value - $ 3,50,000, cost of disposal - $10,000, Value in use - $3,80,000.
Compute impairment loss as 31/12/2022.
•Carrying amount = cost – acc deprn = 500000 – 100000 = 400000
•Fair value – cost of disposal =350000 – 10000 = 340000
•Value in use = 380000
•Recoverable amount = 340000 or 380000 w e h = 380000
•Impairment loss = $400000 - $380000 = $20000.- SOPL - DR