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PPE part 1 - Coggle Diagram
PPE part 1
Accounting treatment of PPE, account for each
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Derecognition
The total accumulated depreciation in respect of the fixed asset sold is transferred as a credit to the realisation account and the corresponding debit to the accumulated depreciation account
By crediting the realisation account with the proceeds of the sales transaction, a profit or loss can be calculated and closed
the cost price of the fixed asset sold is transferred to the fixed-asset sales or realisation account
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If an item qualifies for recognition, then the asset shall be measured at cost: (definition of cost)
Fair value of other consideration given to acquire the asset at the time of acquisition or construction
Where applicable the amount attributed to that asset in accordance with the requirements of other IFRS's
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Costs incurred to use in redeploying asset not included in cost price, e.g
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Costs incurred with regards to item already capable of operating in manner intended, but has not been used or is used at less than full capacity
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Elements of cost include
Purchase price, import duties, non-refundable purchase taxes, deducting discounts / rebates
Directly attributable costs bringing the asset to the location and condition to be capable of operating
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The cost shall be recognized as an asset if, and only if:
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Fair value
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
Main aim of fixed assets is to generate income but at the same time during this process the value of the fixed assets is decreasing
When fixed assets are set free-on-board, ownership is transferred at the place called either the departure point or the arrival point
A fixed-asset register is basically a fixed-asset ledger where all information regarding the fixed assets is recorded. e.g description, date acquired, cost price, residual value, annual depreciation, date of disposal
Capitalisation of costs ceases when the item is in location / condition necessary for it to be capable of operating in manner as intended by management