Unit 2 - PPE & Invest Prop

Unit 2 - PPE & Invest Prop - Unit 2 Property, Plant and...

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1 Unit 2 Unit 2 Property, Plant and Equipment (HKAS 16) and Investment Property (HKAS 40)
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2 Definition Definition Property, plant and equipment (or Tangible Fixed Asset) is defined as tangible asset that : Are held for use in the production or supply of goods and services, for rental to others, or for administrative purposes; and Expected to be used more than one accounting period In summary, i.e. the asset should possess physical substance, be used in operations, and expected to yield services over one accounting period
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3 Recognition Recognition The cost of an item of property, plant and equipment (PPE) should be recognised as an asset if, and only if : It is probable that future economic benefits associated with the item will flow to the entity; and The cost of the item can be measured reliably The first criterion is satisfied when there is a high degree of certainty attached to the flow of future economic benefits at the time of the initial recognition The second criterion is satisfied : When the item is acquired from the market because of the existence of an external transaction; or For internally constructed item, a reliable measurement of the costs incurred in the construction is readily available
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4 Scope of HKAS 16 Scope of HKAS 16 This standard shall apply if property under construction or development that does not yet satisfy the definition of “Investment Property” (HKAS 40) HKAS 16 does not apply to the following : PPE classified as held for sale (HKFRS 5) Biological assets related to agricultural activity (HKAS 41) Mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources (HKFRS 6)
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5 Initial Measurement Initial Measurement An item of PPE that qualifies for recognition as an asset should be measured initially at its cost The cost of a PPE comprises : Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and Any costs directly attributable to bringing the asset to the location and working condition necessary for its intended use by management e.g. employee benefits, site preparation, initial delivery and handling costs, installation and assembly costs, costs of testing, relevant professional fees etc. Initial estimated cost of dismantling and removing the asset and restoring the site to locate the asset, and any obligation that an entity incurs other than inventories The followings are not the costs of an item of PPE : Costs of opening a new facility, introducing a new product or service, conducting business in a new location or with a new class of customer; and administration and other general overhead costs
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6 Exchange of Assets Exchange of Assets When a PPE is acquired in exchange for a non-monetary asset, or part exchange for a combination of monetary and non-monetary assets, the cost of PPE should be measured at fair value of the asset given up, (adjusted by
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This note was uploaded on 03/21/2011 for the course ACCOUNTING 110 taught by Professor Mcwilliams during the Spring '09 term at San Jose State.

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Unit 2 - PPE & Invest Prop - Unit 2 Property, Plant and...

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