Accountin for Asset
Join now to read essay Accountin for Asset
Demolition Costs– New Policy• Demolition costs included in cost of new buildings as site preparation only where– No legal or constructive obligation to restore – Formal management commitment to demolish and build on the site • Demolition costs expensed where no intention to rebuild on the site
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