Recognition
Measurement of inventory an objective of IAS 16. True/False?
False, IAS 16's objective is to allow users to know how the accounting treatment for PP&E works. (Ref IAS 16.1)
A PPE item may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. True/False?
True. Ref IAS 16.24.
Each part of an item of PPE with a cost that is significant in relation to the total cost of the item should not be depreciated separately. True/False?
False, it should be recorded separately according to IAS 16 para 43.
IAS 16 provides guidance whether PPE is impaired? True/False.
False, IAS 36 provides guidance about it, not IAS 16.
(Ref IAS 16.63)
Does IAS 16 apply to any biological assets related to agricultural activity?
Yes, to bearer plants. Ref IAS 16.3b
An entity shall choose both cost model and revaluation model as its accounting policy and shall apply that policy to an entire class of PPE. True/False?
False, an entity shall choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class. Ref IAS 16.29.
When should the residual value and useful life of an asset be reviewed?
It should be reviewed at least at each financial year-end, according to IAS 16 para 51.
If PPE items are stated at revalued amounts, the reason why revaluation is being done has to be disclosed in F/s?
False, this is not a requirement under IAS 16.77.
In which account does day to day costs to service equipment get recorded in?
Repairs and Maintenance expense. (Ref IAS 16.12)
Under the cost model, the asset is carried at cost less accumulated depreciation and accumulated impairment losses. True/False?
True. Ref IAS 16.30.
When does the depreciation of an asset begin?
when the asset is available for use, based on IAS 16 para 55.
The gain from the derecognition of a PPE item shall be classified as revenue? True/False.
False, it is recorded as profit, not as revenue.
(Ref IAS 16.68)
Name 1 cost related to PP&E that does not get recognized as a cost?
Answers can be any one of
(a) costs of opening a new facility;
(b) costs of introducing a new product or service (including costs of advertising and promotional activities);
(c) costs of conducting business in a new location or with a new class of customer (including costs of staff training); and
(d) administration and other general overhead costs. (Ref IAS 16.19)
If a PPE item is revalued, the entire class of PPE to which that asset belongs shall be revalued. True/False?
True. Ref IAS 16.36.
The depreciation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity. True/False?
True, according to IAS 16 para 60.
When the carrying amount of a PPE item shall be derecognized?
- On disposal or
- when no future benefit is expected from its use or disposal.
What is the definition of recoverable amount for IAS 16?
it is the higher of an asset's fair value less costs of disposal and its value in use. (Ref IAS 16.6)
Under the revaluation model, how many years of a PPE item with only insignificant changes should be revaluated?
every three or five years. (Ref IAS 16.34)
What are the three depreciation methods mentioned in IAS 16 para 62?
Straight-line method,
Diminishing balance method,
Units of production method.
How and when compensation for impairment of PPE is recorded?
It is recorded as as profit or loss, when it becomes receivable.
Ref IAS 16.67