Accounting For Assets Flashcards Preview

AAT level 4 Financial statements of LTD companies > Accounting For Assets > Flashcards

Flashcards in Accounting For Assets Deck (21)
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1
Q

What is IAS 16?

A

It is a standard that sets out the accounting treatment for property plant and equipment. These are non current tangible assets such as land and buildings machinery office equipment shop fittings.

2
Q

What does IAS 16 cover under its principles?

A
Recognition 
initial measurement 
cost and revaluation models cost
depreciation 
derecognition
3
Q

Define an asset under the conceptual framework for financial reporting

A

it is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity

4
Q

Define property plant and equipment

A

They are tangible assets held for use in the production or supply of goods and services which are expected to be used for more than one period i.e. 12 months

5
Q

Define depreciation

A

It is the systematic and allocation of the depreciable amount of an asset over its useful life

6
Q

Define depreciable amount

A

It is the cost or valuation of the asset less any residual value

7
Q

Define useful life

A

It is the length of time or the number of units of production for Which an asset is expected to be used

8
Q

Define fair value

A

It is the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date i.e. the date of the valuation

9
Q

Define impairment loss

A

It is the amount by which the carrying amount of an asset exceeds its recoverable amount

10
Q

Define carrying amount

A

It is the amount at which an asset is recognised on the statement of financial position after deducting any accumulated appreciation and impairment losses

11
Q

Define a recoverable amount

A

It is the higher of the assets fair value less costs to sell ,and its value in use

12
Q

Define the value in use

A

It is the present value of the future cash flows expected to be derived from an asset

13
Q

When can an item be recognised as an asset?

A

If it is probable that future economic benefits will flow to the entity
and the cost of the assets can be measured reliably

14
Q

What is to be included in the cost of an asset?

A

Cost is the purchase price including any import duties and other taxes plus any costs directly attributable to bring the Asset to the location and condition for its intended use plus the estimated costs of dismantling and removing the asset at the end of its useful life

15
Q

What are attributable costs that can be included in the cost of the asset

A
Cost of site preparation 
initial delivery and handling costs 
installation and assembly costs 
costs of testing the asset 
professional fees eg engineers and architects
16
Q

After acquisition a PPE of an entity can be carried at either of these two models what are they?

A

Cost model where the asset is carried at cost less accumulate appreciation and impairment losses
or
Revaluation model where it is carried on the statement of financial position at a revalued amount being the fair value less any subsequent depreciation and impairment losses

17
Q

When an item of property plant and equipment is to be revalued, does the entire class of assets to which it belongs have to be revalued at the same time?

A

Yes when a model is chosen this accounting policy must be applied to the entire class of property plant and equipment. therefore when one item of this class is revalued, the whole class has to be revalued.

18
Q

What does IAS 16 say about depreciation of property plant and equipment?

A

I AS 16 states that the depreciable amount of an asset is to be allocated on a systematic basis over its useful life

19
Q

How often does a company have to review the residual value,useful life and depreciation method of its tangible assets?

A

Annually

20
Q

Define derecognition

A

Derecognition occurs when item of property plant and equipment is disposed of or when no future economic benefits are expected from its use or disposal

21
Q

What are the three steps of impairment review?

A

Step1 : what is the carrying amount?
Step2: what is the recoverable amount? I.e. The higher of fair value and value in use
Step3: if recoverable amount is less than carrying amount