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IFRS 2e ch03 - Chapter 3 Property Plant and Equipment...

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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 1 Chapter 3 Property, Plant and Equipment
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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 2 Agend a 1. Meaning of Property, Plant and Equipment 2. Applicable Standard and Scope 3. Recognition 4. Measurement at Recognition 5. Measurement after Recognition 6. Depreciation 7. Impairment 8. Derecognition 9. Disclosure
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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 3 1. Meaning of PPE Property, plant and equipment (PPE) is often a significant item in the balance sheet of an entity Historically, PPE are usually termed as fixed assets and refer to tangible assets held for long term purpose. IAS 16 Property, plant and equipment are tangible items that: 1. are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and 2. are expected to be used during more than one period. The above definition of PPE include 1. the mode of usage and 2. The term of holding by an entity.
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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 4 2. Applicable Standard and Scope IAS 16 Property, Plant and Equipment prescribes the accounting treatment for PPE. An entity should apply IAS 16 in accounting for PPE, except when another accounting standard requires or permits a different accounting treatment, and does not apply to some items of PPE within the scope of other accounting standards, including: Assets held for sale (under IFRS 5 Non-current assets held for sale and discontinued operations ) Biological assets related to agricultural activity (under IAS 41 Agriculture ) Exploration and evaluation assets (under IFRS 6 Exploration for and Evaluation of Mineral Resources )
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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 5 2. Applicable Standard and Scope In order to better understand the accounting treatment of IAS 16, proper knowledge is also required on the accounting treatments in respect of leases (IAS 17) and investment property (IAS 40). IAS 17 set out how to classify PPE held under leases and it also refers the accounting treatment for some assets, including their depreciation, to IAS 16. Newly purchased property under construction that would be held as investment property after the construction should be initially recognised as PPE. Once the construction is complete, the property becomes investment property under IAS 40. An entity using the cost model for investment property in accordance with IAS 40 should use the cost model in IAS 16. Will learn IAS 17, and 40. By that time, you will know the difference between IAS 16, 17 and 40.
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© 2008-11 Nelson Lam and Peter Lau Intermediate Financial Reporting: An IFRS Perspective, 2E (Chapter 3) - 6 3.
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