PAS 16 - CGSCLUSTERV PAS/PFRS & PSA TRAINING IAS 16...

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    CGS-CLUSTER V PAS/PFRS & PSA TRAINING
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IAS 16 PROPERTY, PLANT AND  EQUIPMENT (PPE)
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MODULE OBJECTIVES Define PPE; Identify and apply the principles for the initial recognition of PPE; Measure PPE in the balance sheet; Understand the principles of depreciation accounting; Account for subsequent costs incurred on PPE; Account for de-recognition of PPE; and Identify the required disclosures relating to PPE.
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SCOPE Applies to accounting for property, plant and equipment, except Property, plant and equipment held for sale (PFRS 5) Biological assets related to agricultural activity (PAS 41) Mineral rights and mineral reserves (PFRS 6).
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SCOPE Applies to PPE used to develop or maintain biological assets and assets held for sale; Property that is being constructed or developed for future use as investment property An entity using the cost model for investment property shall use the cost model in this Standard.
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PPE DEFINED PPE are tangible items that are: a. held for use - in the production or supply of goods or services, rental to others, or administrative purposes b. expected to be used during more than one period.
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RECOGNITION The cost of an item of PPE shall be recognized as an asset if, and only if : a. It is probable that future economic benefits associated with the item will flow to the entity, and b. Cost of the item can be measured reliably
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SPARE PARTS AND  SERVICING EQUIPMENT QUALIFY TO BE REPORTED AS PPE if expected to be used for more than one period or can be used only in connection with an item of PPE. OTHERWISE, they are generally carried as inventory and recognized in profit or loss as consumed.
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MEASUREMENT  AT RECOGNITION An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost.
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ELEMENTS OF COST Purchase price, including import duties and non- refundable purchase taxes, after deducting trade discounts and rebates; Costs directly attributable to bringing the asset to the location and condition for use intended by the management; Initial estimate of dismantling costs and removing the item and restoring the site on which the asset is located.
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Examples of  DIRECTLY ATTRIBUTABLE COSTS Employee benefits arising directly from the construction or acquisition of the item of PPE Site preparations Initial delivery and handling costs Installation and assembly costs Costs of testing whether the asset is functioning properly after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition Professional fees
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Illustration 1 (Estimated Dismantling Cost) On January 1, 2007, Julia Company purchased a machine for P2,500,000 cash. The machine’s total useful life is 5 years.
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PAS 16 - CGSCLUSTERV PAS/PFRS & PSA TRAINING IAS 16...

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