Tangible Non-Current Assets

Question 1

What does IAS16 cover?

Any tangible asset that is:

Answer 1

1. Held for use, and
2. expected to be used for more than one accounting period

Question 2

What 2 things allows the entity to recognise an asset?

Answer 2

1. A probable future economic benefit associated with the item that will flow to the entity, and
2. The cost of the item can be measured reliably

Question 3

What are the 2 types of subsequent expenditure?

Answer 3

1. Expenses - repairs and maintenance to put the asset back to its original condition.
2. Enhancement - enhancement to the asset’s performance

Question 4

What is a component asset?

Answer 4

When an asset is split into separate elements and depreciated separately

Question 5

What are the 2 types of measurement post acquisition?

Answer 5

1. Cost model = cost - accumulated depreciation
2. Revaluation model = fair value - subsequent accumulated depreciation

Question 6

What happens if a revaluation model is used post acquisition?

Answer 6

All assets within that class must be held at fair value

Question 7

What governs the frequency of valuations?

Answer 7

The frequency of valuations should be sufficicent enough so that the carrying amount of the asset doesn’t differ materially from its actual fair value.

Question 8

When do you account for a revaluation of a tangible non-current asset?

Answer 8

When there is a significant change in the fair value of the asset and the fair value is greater than carrying value.

Question 9

When should an asset be derecognised?

Answer 9

1. Disposed of or,
2. No future economic benefits are expected.

Question 10

When do you get a realised gain?

Answer 10

Realized Gain = Disposal Proceeds (amount received from selling) - Carrying Amount (original cost of the asset minus any accumulated depreciation)

Question 11

How often should methods of depreciation be reviewed?

Answer 11

Annually

Question 12

What are the directly Attributable Costs of an Asset?

Answer 12

• Salaries paid to employees for constructing the asset
• Cost of site preparation
• Delivery and handling costs
• Installation and assembly costs
• Cost of testing the asset to ensure it is functioning correctly
• Professional fees
• Non refundable taxes and other acquisition costs (duties)