P1 – PROPERTY, PLANT AND EQUIPMENT
Initial Measurement Measurement - at cost, cash + FV of consideration GIVEN Cost Purchase Price +Import duties +NONrefundable purchase taxes -Trade Discounts and Rebates *cost of bringing the asset to location l ocation and condition of operating *initial estimate of DISMANTLING, REMOVING and RESTORING the site
Cost Model Cost less accumulated depreciation and accumulated impairment Revaluation Model Revalued amount less subsequent depreciation and subsequent impairment Rules on valuing PPE upon acquisition Cash basis -cost plus attributable costs -lump sum, apply relative FMV method
*obligation incurred as a consequence consequence OTHER than to produce inventories
On account (lump sum) -ALWAYS recorded at NET OF DISCOUNT whether
Directly Attributable Costs (SPICED) Site preparation
taken or NOT -If not taken, charge to purchase discount lost
Professional Professional Fees Installation and Assembly Costs Cost of testing, NET of proceeds Employee Benefits Site Preparation
Installment Basis -record at CASH price + PV of payment difference between cash price and total payments is AMORTIZED -no cash price is available, PV of payment @
*cost of training staff to operate machinery is
implied interest rate
EXCLUDED Issuance of Share Capital in exchange of Asset Costs NOT capitalizable Opening new facility Introducing new product (advertising and promotion)
(Company paid shares) 1. FV of property received 2. FV of shares issued 3. Par value of shares issued
Conducting to new customers or to new location Administration and Overhead Costs Costs incurred when asset is CAPABLE of operating Initial operating losses Relocation and Reorganizing part or all of an entity’s OPERATION * this refers to the moving to
Issuance of Bonds Payable in exchange of Asset (Company paid bonds) 1. FV of bonds 2. FV of property 3. Face Value of Bonds
other business locations not the location of the
Exchange – no no cash involved
machine itself
1. FV of asset given
Subsequent Measurement Measurement
P1 – PROPERTY, PLANT AND EQUIPMENT
2. FV of asset acquired
income
3. CA of asset given
*Gain/Loss = NET disposal proceeds less CA
Exchange + Cash Payor – FV of asset given + cash
*fully depreciated property, NOT removed from
Recipient – FV of asset given – cash
accounts, however, it is ENCOURAGED to be
Gain or Loss on Exchange = FV of asset given - CA
disclosed
Exchange lacks commercial substance
*Property recognized as Held for Sale, NOT PPE,
Payor – CA of asset given + cash
but as current asset; not depreciated
Recipient – CA of asset given – cash NO GAIN OR LOSS Trade in -Fair Value of asset given + cash payment -if FV not clearly determinable, Trade in + Cash payment Fair Value of Asset Given = Total Cash Price – Trade
*Idle/abandoned property -temporarily idle, still depreciated Optional Disclosures 1. Carrying amount of temporary idle PPE 2. Gross CA of fully depreciated PPE 3. CA of retired from active use and held for sale 4. FV of PPE when COST MODEL is used
in Value Donation (Shareholders/Government Grant) -recorded at FV; recorded as income
In computing costs, deduct Trade Discounts and Rebates FIRST, then deduct the purchase discount.
-expenses incurred in relation to DONATION,
Any proceed from sale of salvaged material is
charged to DONATED CAPITAL
deducted from cost of the asset recorded.
-directly attributable costs, CAPITALIZED
Fair Value of Asset Given = Total Cash Price – Trade
Construction
in Value
-DM, DL, OH (based on DL cost/hours)
If there is NO COMMERCIAL SUBSTANCE, no gain
*self-construction cost < purchase, recorded as
or loss
savings NOT income
Gain or Loss on Exchange = FV of asset given – CA
*self-construction cost > purchase, not loss *if excess is materially excessive, charged to management *abnormal waste expensed, normal waste capitalized *intervening operations/incidental operations, separately recognized Derecognition When? 1. No future economic benefits 2. Disposal *Gains from disposal ARE NOT REVENUE, they are
Borrowing Costs incurred to finance the equipment is CAPITALIZABE, that is, interest expense