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Topic 2 - PPEs (Eng) - SV
Topic 2 - PPEs (Eng) - SV
Tangible
Intangible
Property, Plant,
Equipment & No Physical
Investment Property Substance
Applying on or after 1
January 2022. Early
application is permitted.
Depreciation method
Residual Periods Number
Cost of units
value
Group and
Time-based Methods composite
lStraight-line (SL) methods
lAccelerated Methods
Sum-of-the-years’ digits (SYD) Tax
Diminishing balance depreciation
(Declining Balance (DB))
Ex:
A building contains disparate components as a
building shell, a heating plant, a roof and other
discrete mechanical components.
à Allocation of costs over useful lives is based on
separate estimated lives for each component.
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Depreciation of PPE
Residual value
Is subject to at least annual review.
Useful lives
When reviewing the depreciation method, that the
estimated life is greater or less than previously
believed, the change is treated as a change in
accounting estimate.
à The change is accounted on a prospective basis.
Revaluation
Cost Model
Model
A revaluation surplus is
reported as other
Revaluation deficit is
comprehensive income and
accumulated in a revaluation recognized as an expense in
surplus account in equity the income statement unless
there is a balance in the
unless a revaluation deficit
revaluation surplus account
has been charged to the
income statement previously
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Revaluation Model
Initial revaluation:
Credit to other
Increase in an comprehensive income
asset’s carrying (gain on revaluation)
amount:
Long-term assets
to be held and used IAS 36 –
Impairment
loss
Tangible and
intangible
with finite
useful lives
Gain or loss
Asset that necessarily Interest and other costs that are incurred
takes a substantial period in connection with the borrowing of funds
of time to get ready for its that are directly attributable to the
intended use. acquisition, construction or production of
the qualifying asset
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Borrowing Cost Capitalization
ISA 23 –
Borrowing costs
Specific borrowings
• Entity uses funds borrowed specifically for the purpose of
purchasing or producing the qualifying asset
• Specific borrowing cost = actual borrowing costs incurred –
investment income (earned on temporary investment of
surplus specific borrowings)
. . . Capitalize this
portion using the 12 Other
percent weighted- debt
average cost of debt.
. . . Capitalize this AAE Specific
portion using the 10 new
percent specific borrowing
borrowing rate.
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Disclosures
For each class of tangible asset, disclosure is required of:
1. The measurement basis used (cost or revaluation
approaches).
2. The depreciation method(s) used.
3. Useful lives or depreciation rates used.
4. The gross carrying amounts and accumulated depreciation
at the beginning and at the end of the period.
5. A reconciliation of the carrying amount from the beginning to
the end of the period, showing additions, disposals and/or
assets included in disposal groups or classified as held-for-
sale, acquisitions by means of business combinations,
increases or decreases resulting from revaluations,
reductions to recognised impairments, depreciation, the net
effect of translation of foreign entities’ financial statements
and any other material items.
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Disclosures
In addition, the financial statements should also disclose
the following facts:
1. Any restrictions on titles and any assets pledged as security
for debt.
2. The accounting policy regarding restoration costs for items of
property, plant and equipment.
3. The expenditures made for property, plant and equipment,
including any construction in progress.
4. The amount of outstanding commitments for property, plant
and equipment acquisitions.
5. The amount received from any third parties as compensation
for any impaired, lost or given-up asset. This is only
applicable if the amount received was not separately
disclosed in the statement of comprehensive income.
1.1.20X2 Depreciation
1.1.20X3 Loss
Depreciation
1.1.20X4 Depreciation
1.1.20X5 Depreciation
Year X1
Year X2
Year X3
Year X4
Year X5