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PPE definition.docx - PPE- FAR Initial measurement at cost....

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PPE- FARInitial measurement at cost. Cost of PPE shall includea. cost of acquisition*b. incidental cost in bringing the asset to its present location and condition necessary for usec. present value of the initial estimate of dismantling, removal or site restoration cost (to the extent that thecompany has incurred an obligation over these future cost, credit goes to a provision account- asset retirementobligation)*cost of acquisition depends on mode of acquisitiona. cash purchase- cash price+ import duties+ nonrefundable taxes (net of discount and rebates)b. on account- at cash price equivalent (net of discount whether taken or not)c. installment or deferred payment basis- at cash price equivalent or at PV of deferred paymentd. share or bond issue- at FV of asset or shares whichever is more clearly determinablee. exchange with commercial substance- at FV of the asset received (which is equal to the FV of asset given upplus cash paid or minus cash received)f. exchange without commercial substance- at book value of asset given up plus cash paid or minus cashreceived.g. donation where the donor is related party- at FV (credit to APIC/donated capital)h. donation where the donor is non-related party (gov’t.)- at FV (credit to income if unconditional grant, ordeferred income if conditional grant)SUBSEQUENT MEASUREMENTa. cost method- at cost, net of accumulated depreciation and impairment lossb. appraisal/revaluation method- at fair market valueDEPRECIATION METHODDS1. straight line method2. SYD method3. declining balance method4. working hours or output method5. othersIMPAIRMENT LOSSAn asset is impaired if only the carrying value is > that the recoverable value.Net recoverable value is the higher betweenthe fair value less cost to sellorthe value in useFV less cost to sell= estimated selling price less estimated cost to sellValue in use = PV of the future cash flows from the continued use of the asset and from its ultimate disposalusing pre-tax discount rate.

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Term
Fall
Professor
Maxine
Tags
Depreciation, Generally Accepted Accounting Principles

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