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Report in Accrev (Ppe)

Property, plant and equipment (PPE) refers to tangible items that are used in operations for more than one year. To qualify as PPE, items must be used to produce goods/services or for administrative purposes and are expected to be used for more than one period. PPE is initially measured at cost, which includes purchase price and any costs to prepare the asset for its intended use. After initial recognition, PPE is usually carried at cost less accumulated depreciation.

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55 views18 pages

Report in Accrev (Ppe)

Property, plant and equipment (PPE) refers to tangible items that are used in operations for more than one year. To qualify as PPE, items must be used to produce goods/services or for administrative purposes and are expected to be used for more than one period. PPE is initially measured at cost, which includes purchase price and any costs to prepare the asset for its intended use. After initial recognition, PPE is usually carried at cost less accumulated depreciation.

Uploaded by

PaulineBirosel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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PROPERTY, PLANT, AND

EQUIPMENT

Balome, Beberino,

Property, plant and


equipment (IAS 16.6):
Tangible items that:
(a) are held for use in the
production or supply of goods or
services, for rental to others, or
for administrative purposes; and
(b) are expected to be used
during more than one period

Characteristics / Nature

Tangible
Tangible
Assets.
Assets.

Useful
Used
Useful life
life is
is
Used to
to
more
produce
more than
than one
one
produce
year.
revenue
year. (non
(non
revenue rather
rather
current
than
current
than being
being held
held
assets)
for
assets)
for resale.
resale.

RECOGNITION
Costs are recognized as PP&E only if:
1. probable that future economic benefits
associated with the item will flow to the
entity, and
2. the cost can be measured reliably.
Applies to costs at acquisition and after
acquisition. It shall evaluate at the time
PPE is
incurred

Generally:
Spare parts and servicing equipment are carried as
inventory and recognized as an expense.
However:
Major spare parts and stand-by equipment used
more than one period = Property Plant and
Equipment
Same criteria apply to major repairs and
overhauls

Measurement at the time of


recognition
Cost is defined as:
Cash or cash equivalents paid or the FV
of other consideration given to acquire
asset when acquired or constructed
Cost elements to include:
1. Purchase price net of discounts, rebates,
and add non-recoverable taxes, duties
2. Costs to get in place and ready to use as
management intended
3. Costs of obligation to decommission asset
and restore site as a result of acquiring the
asset

Measurement at the time of


recognition
Cost elements to exclude:
1. Costs after asset in place and ready
for use as management intended
2. Costs to open a new facility, introduce
a product, move to new location
3. General and administrative overhead
type costs

Measurement at the time of


recognition
If self-constructed:
1. Apply same principles
2. Charge abnormal costs to Profit or
Loss
3. Interest costs during construction
(IAS 23)
4. Government assistance (IAS 20)

Cost Model (CM):


PP&E are carried after acquisition at cost,
less
accumulated depreciation and
accumulated
impairment losses
Revaluation Model (RM):
PP&E are carried after acquisition at fair
value at
date of revaluation, less any accumulated
depreciation
and impairment losses after revaluation

Acquisition Cost - Land


Purchase price
Title insurance
premiums

Real estate
commissions

Title search

Title transfer
fees

Acquisition Cost - Buildings


Legal costs
Purchase price
Purchase
price

Remodeling
costs

Unpaid taxes
we assumed

Bu
il

din

gC
os
t

Real estate
commissions
paid

Acquisition Cost - Equipment


Testing
costs

Net
purchas
e
price

Transportation
costs

Installation
costs
Insurance
while in
transit

ACQUISITION OF
PROPERTY

Cash Basis: Cost of an item of PPE is the


cash price equivalent at the recognition
date.
Equation: Cost Paid + Directly attributable
cost + other necessary cost
Installment

basis: payment for PPE is


deferred beyond normal credit, the cost is
cash price equivalent. Interest to be
amortized over the credit period.

ACQUISITION OF PROPERTY

Issuance of share capital


UNDER GAAP, if shares are issued for
consideration other than actual cash, proceeds
shall be measured by FAIR VALUE.
Fair Value of property received
FV of share capital
Par of stated value of the capital
Issuance of bonds payable
Entity shall measure the financial liability at its
FV plus Transaction cost directly attributable
Fair value of bonds payable
Fair value of asset received
Face value of bonds payable

ACQUISITION OF PROPERTY
Exchange
cost of an item of PPE acquired in
exchanged for a nonmonetary asset or a
combination of monetary asset is
measured at FAIR VALUE unless
transaction lacks commercial substance or
FV of neither the asset received nor the
asset given up is reliably measured.
With commercial substance = Measure @
FAIR VALUE
Without commercial substance = Measure
@ Carrying amount of the asset given up

Commercial substance
A business transaction is said to have
commercial substance when it is expected
that the future cash flows of a business will
change as a result of the transaction. A
change in cash flows is considered to be when
there is a significant change in any one of the
following (not including tax considerations):
It exists if:
1.
Cash flows (amount, timing, risk) of new asset
differ from those of old asset(s) transferred; or
2.
After-tax cash flows of part of business taking
on new asset (entity specific value) have
changed; and

Exchange No
cash involved

Fair

value of
property given
Fair value of
property received
Carrying amount of
property given

Exchange cash is
involved

Fair

Value of asset
given plus cash
payment (Payors
part)

Fair

Value of asset
given minus cash
reveived (recepients
part)

ACQUISITION OF PROPERTY

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