Buy custom accountin for asset
Essay's paper info
| Topic: |
Business
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| Number of pages / Number of words: |
3 / 828 |
Essay's paper body
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Page 17
Subsequent Expenditure• Major replacements and regular major inspections (which are a condition of continued operation) are capitalised (AASB 116 paras 13-14)• Repairs and maintenance are expensed as is day to day servicing (AASB 116 para 12)
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Page 18
VALUATION
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Page 19
Cost vs Valuation – AASB 116 (para 29) allows (by class) use of either– Cost model or – Valuation model • Non-Current Asset Policies override – mandate the valuation model all physical assets – Plant and equipment and WIP exceptions
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Page 20
- Cost model – carried at cost less accumulated depreciation less impairment losses (AASB 116 para 30)• Valuation model – revalued amounts less accumulated depreciation less impairment losses – regular revaluation (AASB 116 para 31)
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Page 21
Fair Value• Fair value definitionthe amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction • If an item is revalued, the entire class shall be revalued (AASB 116 para 36)
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Page 22
Accounting for Revaluations• Increments taken to the asset revaluation reserve (equity), except where they reverse a previous decrement recognised in profit or loss, they are taken to profit or loss
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Page 23
- Revaluation decrements are recognised in profit or loss, unless there is balance in the revaluation reserve• On transition to IFRS – For-profit entities now account for revaluations on an asset by asset basis– Not-for-profit entities still on a class basis
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Page 24
Revaluation and Depreciation• AASB 116 provides two options for accumulated depreciation (AASB 116 para 35)– Restate proportionately (gross method) or– Eliminate (net method)• The Non-current Asset Policies override this choice and mandate the gross method
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Page 25
DEPRECIATION
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Page 26
- Depreciation (AASB 116 para 6)The systematic allocation of the depreciable amount of an asset over its useful life
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Page 27
- Depreciable amountIs the cost of an asset, or other amount substituted for cost, less its residual value
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Page 28
- Residual valueThe estimated amount an entity would currently obtain from disposal of the asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life
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Page 29
- Useful lifeThe period over which an asset is expected to be available for use by an entity: or the number of production units expected to be obtained from the asset by the entity
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Page 30
Depreciation Methods• Depreciation method chosen must reflect the pattern in which the assets’ future economic benefits are expected to be consumed (AASB 116 para60)
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Page 31
- Time based depreciation – Straight line (Depreciation = c-r/n)– Reducing balance (Depreciation Rate=1-nvr/c) n=estimated useful life in yearsr=estimated residual valuec=gross carrying amount
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Page 32
–Output/Service method•p/qx cp=actual outputs during periodq=estimated useful life in outputsc=gross carrying amountCertain other methods of depreciation not permitted under AASB 116
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Page 33
Review of Depreciation• At least at the end of each annual reporting period must review:– Method of depreciation (AASB 116 para 61)– Residual value and the useful life (AASB 116 para 51)• Any changes accounted for per AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
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Page 34
IMPAIRMENT(Brief Overview)
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Page 35
Impairment• AASB 136 Impairment of Assets requires all non-current assets to be assessed for impairment– Test only where there is an indicator of impairment• Test carrying amount does not exceed the recoverable amount (higher of)– Fair value less costs to sell and– Value in use (DCF or DRC)
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Page 36
Impairment Disclosure• Gross carrying amount less the aggregate of accumulated depreciation and accumulated impairment losses• To aid in transparency the FRRs mandate$XXLess accumulated depreciation and Impairment$XXXCarrying amount$XLess accumulated depreciation$XLess accumulated impairment losses$XXXCarrying amount
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Page 37
DERECOGNITION
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Page 38
Derecognition• Carrying amount of property plant and equipment is derecognised (AASB 116 para 67) on– disposal or– no future economic benefits are expected
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Page 39
Gain or loss on disposal• Any gain or loss on derecognition(excl leases) is included in the profit or loss (AASB 116 para 68)• Under IFRS gains on disposal are not shown as revenue but as gains (Income = revenue + gains)
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Page 40
AASB 5 Held for Sale• Classified as Held for Sale (current asset) where the carrying amount will be recovered through sale rather than continuing use • New requirement under IFRS
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Page 41
DISCLOSURE
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Page 42
Disclosure• Disclosure requirements contained in AASB 116 (paras 73-79)• AASB 116 optional disclosures, Treasury Policy (FRR 7...
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Page 17
Subsequent Expenditure• Major replacements and regular major inspections (which are a condition of continued operation) are capitalised (AASB 116 paras 13-14)• Repairs and maintenance are expensed as is day to day servicing (AASB 116 para 12)
--------------------------------------------------------------------------------
Page 18
VALUATION
--------------------------------------------------------------------------------
Page 19
Cost vs Valuation – AASB 116 (para 29) allows (by class) use of either– Cost model or – Valuation model • Non-Current Asset Policies override – mandate the valuation model all physical assets – Plant and equipment and WIP exceptions
--------------------------------------------------------------------------------
Page 20
- Cost model – carried at cost less accumulated depreciation less impairment losses (AASB 116 para 30)• Valuation model – revalued amounts less accumulated depreciation less impairment losses – regular revaluation (AASB 116 para 31)
--------------------------------------------------------------------------------
Page 21
Fair Value• Fair value definitionthe amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction • If an item is revalued, the entire class shall be revalued (AASB 116 para 36)
--------------------------------------------------------------------------------
Page 22
Accounting for Revaluations• Increments taken to the asset revaluation reserve (equity), except where they reverse a previous decrement recognised in profit or loss, they are taken to profit or loss
--------------------------------------------------------------------------------
Page 23
- Revaluation decrements are recognised in profit or loss, unless there is balance in the revaluation reserve• On transition to IFRS – For-profit entities now account for revaluations on an asset by asset basis– Not-for-profit entities still on a class basis
--------------------------------------------------------------------------------
Page 24
Revaluation and Depreciation• AASB 116 provides two options for accumulated depreciation (AASB 116 para 35)– Restate proportionately (gross method) or– Eliminate (net method)• The Non-current Asset Policies override this choice and mandate the gross method
--------------------------------------------------------------------------------
Page 25
DEPRECIATION
--------------------------------------------------------------------------------
Page 26
- Depreciation (AASB 116 para 6)The systematic allocation of the depreciable amount of an asset over its useful life
--------------------------------------------------------------------------------
Page 27
- Depreciable amountIs the cost of an asset, or other amount substituted for cost, less its residual value
--------------------------------------------------------------------------------
Page 28
- Residual valueThe estimated amount an entity would currently obtain from disposal of the asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life
--------------------------------------------------------------------------------
Page 29
- Useful lifeThe period over which an asset is expected to be available for use by an entity: or the number of production units expected to be obtained from the asset by the entity
--------------------------------------------------------------------------------
Page 30
Depreciation Methods• Depreciation method chosen must reflect the pattern in which the assets’ future economic benefits are expected to be consumed (AASB 116 para60)
--------------------------------------------------------------------------------
Page 31
- Time based depreciation – Straight line (Depreciation = c-r/n)– Reducing balance (Depreciation Rate=1-nvr/c) n=estimated useful life in yearsr=estimated residual valuec=gross carrying amount
--------------------------------------------------------------------------------
Page 32
–Output/Service method•p/qx cp=actual outputs during periodq=estimated useful life in outputsc=gross carrying amountCertain other methods of depreciation not permitted under AASB 116
--------------------------------------------------------------------------------
Page 33
Review of Depreciation• At least at the end of each annual reporting period must review:– Method of depreciation (AASB 116 para 61)– Residual value and the useful life (AASB 116 para 51)• Any changes accounted for per AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
--------------------------------------------------------------------------------
Page 34
IMPAIRMENT(Brief Overview)
--------------------------------------------------------------------------------
Page 35
Impairment• AASB 136 Impairment of Assets requires all non-current assets to be assessed for impairment– Test only where there is an indicator of impairment• Test carrying amount does not exceed the recoverable amount (higher of)– Fair value less costs to sell and– Value in use (DCF or DRC)
--------------------------------------------------------------------------------
Page 36
Impairment Disclosure• Gross carrying amount less the aggregate of accumulated depreciation and accumulated impairment losses• To aid in transparency the FRRs mandate$XXLess accumulated depreciation and Impairment$XXXCarrying amount$XLess accumulated depreciation$XLess accumulated impairment losses$XXXCarrying amount
--------------------------------------------------------------------------------
Page 37
DERECOGNITION
--------------------------------------------------------------------------------
Page 38
Derecognition• Carrying amount of property plant and equipment is derecognised (AASB 116 para 67) on– disposal or– no future economic benefits are expected
--------------------------------------------------------------------------------
Page 39
Gain or loss on disposal• Any gain or loss on derecognition(excl leases) is included in the profit or loss (AASB 116 para 68)• Under IFRS gains on disposal are not shown as revenue but as gains (Income = revenue + gains)
--------------------------------------------------------------------------------
Page 40
AASB 5 Held for Sale• Classified as Held for Sale (current asset) where the carrying amount will be recovered through sale rather than continuing use • New requirement under IFRS
--------------------------------------------------------------------------------
Page 41
DISCLOSURE
--------------------------------------------------------------------------------
Page 42
Disclosure• Disclosure requirements contained in AASB 116 (paras 73-79)• AASB 116 optional disclosures, Treasury Policy (FRR 7...
Essay fragment
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