1 2011 Week 3 Assets 1 PPE Revaluation and Impairment Blackboard 6pgs

1 2011 Week 3 Assets 1 PPE Revaluation and Impairment Blackboard 6pgs

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10/03/2011 1 Accounting for Assets (1): Measurement, Depreciation, Revaluations and Impairment ACCT 2011 Week 3 2 Objectives of Week 3 Discuss and apply the definition and recognition criteria for assets Discuss and apply the measurement rules for non-current assets Prepare appropriate entries to revalue or impair a non-current asset Discuss the contractual implications of asset revaluations and their impact on depreciation and profit on disposal of the asset 3 Readings Deegan: Chapters 4, 5 and 6 Handbook: AASB 116 Property, Plant and Equipment AASB 136 Impairment of Assets Readings: Penman (2010) pp 33-37 Self-study questions: refer Blackboard 4 4 Outline A. Asset Definition, Recognition & Measurement (General) B. Review of ACCT1001 and 1002 (PPE) (acquisition, subsequent expenditure, depreciation, disposal) C. Measurement after Acquisition (PPE) D. Predictions of PAT E. Choosing a method: Ethics? 5 A. Asset Definition, Recognition & Measurement (General) Definition: Framework ¶49(a) [read this] - Future economic benefits the scarce capacity to provide services or benefits future net cash inflows - Control capacity to benefit from the asset deny / regulate access of others - Past transactions or other past events must have already occurred 6 A. Asset Definition, Recognition & Measurement (General) Recognition criteria: Framework ¶83 [read this] probable reliable measurement Non -essential characteristics: acquisition cost to the entity tangibility exchangeability legal ownership
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10/03/2011 2 7 A. Asset Definition, Recognition & Measurement (General) Measurement rules vary across different standards (see pp. 140-142 Deegan customised textbook) cost (with/without amortisation/depreciation) fair value (amount for which it could be exchanged in an arm’s length transaction) lower of cost and net realisable value (e.g., inventory) market value (e.g., assets held for trading) present value (e.g., leased assets) recoverable amount (higher of its fair value less costs to sell and its value in use ) AASB 136 ‘Impairment of Assets’ addresses the recognition, measurement, and disclosure of impairments and reversals of impairments. 8 Acquisition of an asset Amount at which asset should be initially recorded & amounts to be included in cost (AASB 116 ¶15, 16) Subsequent expenditure is either capitalised or expensed (¶12) 9 B. Review of depreciation Depreciation of non-current assets (AASB 116 ¶ 43-62) Asset benefit (depreciable amount) is allocated over the asset’s useful life Requires estimation of residual value & useful life (estimations must be reviewed annually) Common depreciation methods include straight-line, accelerated depreciation, units of production In ACCT2011 you can assume all questions use straight-line depreciation (including in exams) except
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1 2011 Week 3 Assets 1 PPE Revaluation and Impairment Blackboard 6pgs

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