Chapter 6 NCA

The revaluation of intangibles will be uncommon in practice as
it is not expected that an active market will exist for most
intangible assets in that:
 they will not be homogeneous (most are unique);
 willing buyers and sellers may not be normally found at any
time; and
 prices are not usually available to the public.

IAS 16 PPE

recognition

Initial measurement:

at the cost: purchase price/ purchase tax ( after deducting trade discount and rebates)/directly attributable cost of bringing it to the working condition and location:
direct construction or acquisition salary and wages/ site preparation/ initial delivery and handling cost/ installation and assembly/ proper functioning test/ professional fee/ decommissioning cost/ borrowing cost

subsequent measurement

cost:cost - acc. dep'n and any imp loss

FV:FV - subsequent acc dep'n and ant acc imp loss

FV should be reliably measured

probable future economic benefit inflow

cost reliably measured

Subsequent cost

Capital exp.

revenue exp. (running cost): service maintenance and repairs/ made to restore or maintain future economic benefit

major inspection or overhaul cost

part replacement: aircraft engine: needs regular replacement and have different useful lives

On initial recognition, an estimate will be made of the inspection costs and that amount will be depreciated over the period to the first inspection. This amount is part of the original cost recognised and is not an additional component of cost.
 Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised.
 The amount capitalised will be depreciated over the period to the next major inspection, when the costs incurred at that point will be capitalised

non- dep'n: hotel: argument for: high maintenance cost/ rv=CA/ long useful life asset /asset not currently in use

IAS 40 IP

IAS 16 mentions dep'n should be charged even it is nill

Recognition

probable future economic outflow

cost measured reliably

IP under construction now is under IAS 40

Initial measurement

cost which is FV of consideration given + transaction cost

Subsequent measurement

Cost Model :

 After initial recognition, an entity that chooses the cost model shall measure all of its investment property using the cost model in IAS 16 Property, Plant and Equipment (i.e. at cost less any accumulated depreciation and impairment losses).

 An investment property, measured under the cost model, that
is subsequently classified as held for sale in accordance with
IFRS 5 is measured in accordance with that standard.

FV Model : according IFRS13

if chosen All IP should be revalued unless exception

Gain or loss: P/L

FV definition: the price
that would be received
to sell an asset or paid
to transfer a liability in
an orderly transaction
between market
participants at the
measurement date.

IFRS 5 NCA held for sale: when CA recovered mainly through proceeds on disposal rather continuing use. must meet highly probable criteria:

 Management must be committed to a plan of sale;
 The entity must be actively seeking a buyer;
 The asset must be marketed at a reasonable price; and
 The sale should be completed within 12 months.*

Measurement

 Immediately before classification of an asset as held for sale,
it must be measured in accordance with the relevant standard.

 On classification as held for sale, the asset is measured at the
lower of its carrying amount and the asset's fair value less
costs to sell. Any loss on valuing at fair value less costs to sell
is charged against profit unless the asset has a revaluation
surplus (in which case the loss will be taken through other
comprehensive income, resulting in a decrease in the
revaluation surplus).

 Once classified as held for sale, the asset will no longer be
depreciated and presented separately (from continuing use
assets) in the statement of financial position.

IAS 38 intangible assets: internally or business combination

identifiable: separable or arise from contractual or other legal rights

intangibles is distinguished from GW in business combination

Initial measurement

at cost like trangibles (unless it is granted)

 separately;
 as part of a business combination;
 by way of a government grant;
 internally generated; or
 by an exchange of assets.

Subsequent Measurement

Cost Model: cost less acc. amotis. and acc imp loss

FV Model

 Revalued amount, being fair value at the date of the
revaluation less any subsequent accumulated amortisation and
any accumulated impairment losses.
 Fair value must be measured by reference to an active market.
 This is different from the treatment of revaluation under IAS
16 where depreciated replacement cost can be used when
there is no evidence of market value.
 The revaluation model does not allow:
 the revaluation of intangible assets which have not
previously been recognised as assets;
 the initial recognition of intangible assets at amounts other
than their cost.
 The revaluation is carried out according to the same principles
applied in accounting for other assets. For example:
 surplus is taken through other comprehensive income and
increases the revaluation surplus;
 deficit is expensed unless covered by a previously
recognised surplus;
 all intangibles in the class must be revalued, etc.

IAS 23 Borrowing cost: capitalised for qualifying assets ( takes substantial amount of time ready for intended use or sale) otherwise expensed

capitalisation:
 Capitalisation commences when:
 expenditure has been incurred;
 borrowing costs are being incurred; and
 activity has commenced.
 Capitalisation should be suspended during extended periods in which active development is interrupted.
 Capitalisation should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

IAS 20 Gov Grants

Income based

Asset based

Deferred Income: The grant will be presented as deferred income in the
statement of financial position. Deferred income is included in
the liability section of the statement of financial position, split
between non-current and current elements.*
 The deferred income will be credited to profits over the life of
the related asset, in the same manner in which that asset is
depreciated.

Deduct from cost of asset:The effect on profits will be the same as the previous method
due to the fact that the charge for depreciation will now be
based on the net cost of the asset.*

Granted Asset: Some intangible assets may be acquired free of charge, or for
nominal consideration, by way of a government grant (e.g.
airport landing rights, licences to operate radio or television
stations, import quotas, rights to emit pollution).
 Under IAS 20, both the intangible asset (debit entry) and the
grant (credit entry) may be recorded initially at either fair
value or cost (which may be zero).