Ch11 - Chapter 11 Non-current assets: Property, plant and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 11 –Non-current assets: Property, plant and equipment, and intangibles CHAPTER OVERVIEW In Chapter 9, you were introduced to the principles of internal control. In Chapters 6, 9, and 10, you saw how companies maintain control over three very important current assets: inventories, cash and receivables. In this chapter, we continue the discussion of internal control with specific application to non-current assets, sometimes called long-term assets. Non-current assets include tangible assets such as equipment, buildings, natural resources, and intangible assets (without physical form). The learning objectives for the chapter are to: 1. Measure the cost of a non-current asset 2. Account for depreciation 3. Select the best depreciation method for income tax purposes 4. Account for the disposal of a non-current asset 5. Account for the revaluation of a non-current asset 6. Account for intangible assets CHAPTER REVIEW Objective 1 - Measure the cost of a non-current asset. Business assets are classified as current or non-current. Current assets are considered to be useful for one year or less. Non-current assets are expected to be useful longer than a year. Plant and equipment (also called depreciable assets) are long-term assets; the business uses their service potential over a number of years. Property, plant and equipment are tangible assets; that is, they have physical form. The cost of a plant, property and equipment (under AASB 116 Property, Plant and Equipment ) is the purchase price plus any other amount paid to acquire it and make it ready for use. The cost of land includes the purchase price, brokerage commission, survey fees, legal fees, government stamp duty, costs to clear the land, and costs to demolish or remove any unwanted buildings, but not costs like new fences or upgrading the irrigation system. These are known as land improvements and are separate depreciable assets. The cost of buildings includes the purchase price, taxes, and any expenditure to repair or renovate the building to make it ready for use. The cost of constructing a building includes all fees, labour and materials and may include interest on money borrowed while the building is being constructed (AASB 123 Borrowing Costs ). The cost of machinery and equipment includes the purchase price, transportation charges, transportation insurance, commissions, and installation and testing costs. The cost of improvements to leased assets is called leasehold improvements and should be depreciated over the lease period. When a company purchases a group of assets for one single amount (also known as a lump-sum, group purchase or a basket purchase ), the total cost of the assets is allocated to individual assets (according to the previous accounting standard AASB 1015, but not covered in the current standard Non-current assets: Property plant and equipment, and intangibles 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
AASB 116) by the relative-fair-value method. To use the relative-fair-value method , it is necessary to do the following:
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/10/2010 for the course ECON 7300 at University of Sydney.

Page1 / 25

Ch11 - Chapter 11 Non-current assets: Property, plant and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online