IFRS - chapter 11

IFRS - chapter 11 - IFRS PP&E Components Separate assets...

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1 Components Separate assets into component parts to identify significant parts Examples: Relining furnace, replace aircraft interiors, major inspections Significant part of cost relative to total cost of item Depreciate each significant part separately Depreciation is recognized in profit and loss IFRS – PP&E
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2 Components: Major inspection example Gas and Oil company builds a refinery Total cost of construction is $200 million Estimated useful life of the refinery is 20 years Major inspection expected every 4 years Estimated cost is $20 million Allocate cost of refinery to is parts All components of the refinery are expected to last for 20 years IFRS – PP&E
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3 Components Major Inspection Example Total cost of Refinery – 20 million Refinery - $180 million – depreciate over 20 years Major inspection – 20 million – depreciate of 4 years Major inspection occurs early: derecognize carrying value e of asset, capitalize cost of inspection and depreciate over current estimated useful life. IFRS – PP&E
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4 Depreciation Allocated on a systematic basis over useful life Depreciation determined after deducting residual value IFRS – PP&E
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5 Depreciation Method Method should reflect pattern in which economic benefits are expected or consumption Method should be reviewed at each year end to assess any significant change in pattern of consumption If expectations differ from previous estimates,
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IFRS - chapter 11 - IFRS PP&E Components Separate assets...

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