IFRS Workshop

Winter 2018
 Anjum Maqsood – ACA
Introduction
 Ten 10 years teaching experience of
Accounting, Reporting and Finance subjects in
CA, ACCA, CMA.
 Principal – SKANS FSD
 Faculty Member of ICMAP in Financial
Reporting (From 2009 to date).
 “Best session faculty” award winner announced
by ICMAP in Summer 2010 and in Summer
2011.
 Trainer with RMC International for
International training on financial
management and audit.
Session Topic IAS
1 Property, plant and equipment IAS-16
2 Intangible Assets IAS-38
3 Impairment of assets IAS-36
4 Inventories IAS-2
5 Related party disclosures IAS-24
6 Presentation of financial statements IAS-1
7 Accounting policies estimates errors IAS-8
8 Income taxes IAS-12
9 Revenue from contracts with customers IFRS 15
10 Leases IFRS 16
IFRS Introduction
IAS-16 Property, plant and equipment
 International Financial Reporting Standards
are the accounting standards set by the
International Accounting Standards Board
(IASB).

 International Financial Reporting Standards

were previously known as International
Accounting Standards (IAS).
 The term IFRS includes:

IFRSs are Standards and Interpretations issued by the

International Accounting Standards Board (IASB). They
comprise:
(a) International Financial Reporting Standards;
(b) International Accounting Standards;
(c) IFRIC Interpretations; and
(d) SIC Interpretations
 Objective of IFRS is
International Harmonization
in the field of accountancy
 16 members
 One Chairman
 Two Vice Chairman
 Term of Members : 5 years
 Renewable upto: Further 3 years
 Current Head Office at UK
 Setting the agenda
 Planning the project
 Developing and circulating the discussion
paper among member bodies
 Developing and circulating the exposure draft
among member bodies
 Developing and circulating the standard
among member bodies
 IAS were published by the International
Accounting Standards Committee (IASC)
between 1973 and 2001
 IFRS were published by the International
Accounting Standards Board (IASB), starting
from 2001.
IFRIC - IFRS Interpretation Committee
 Reviews on a timely basis widespread
accounting issues that have arisen within the
context of current International Financial
Reporting Standards (IFRSs)
SIC - Standards Interpretation Committee:
 It was founded with the objective of
developing interpretations of International
Accounting Standards (IASs) to be applied
where the standards are silent or unclear
Anjum Maqsood - ACA 19
The principal issues in accounting for property,
plant and equipment are the:

 recognition of the assets,

 the determination of their carrying amounts
and
 the depreciation charges and impairment
losses to be recognised in relation to them.
This Standard shall be applied in accounting for property,
plant and equipment except when another Standard requires
or permits a different accounting treatment.

This Standard does not apply to:

(a) property, plant and equipment classified as held for sale in

accordance with IFRS 5.
(b) biological assets related to agricultural activity other than
bearer plants.
(c) the recognition and measurement of exploration and
evaluation assets (see IFRS 6).
(d) mineral rights and mineral reserves such as oil, natural
gas and similar non-regenerative resources.

However, this Standard applies to property, plant and

equipment used to develop or maintain the assets described
in (b)–(d).
The cost of an item of property, plant and
equipment 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) the cost of the item can be measured
reliably.
 Measurement

Subsequent After
At recognition
expenditure recognition

Cost model Revaluation

Cost model

Fair value
Cost Less:
Less: Acc Dep Subsequent
Less: Acc imp Acc
Dep
Less:
Subsequent
Acc Imp
Anjum Maqsood - ACA 23
Following are elements of cost:

a) Purchase price,
b) Expenditures necessary to bring an asset
into location and condition; and
c) Present value of dismantling cost for which
obligation is incurred

Anjum Maqsood - ACA 24

Examples of cost:

a) Salaries and wages;

b) Cost of site preparation;
c) Initial delivery and handling cost;
d) Installation and assembly cost;
e) Cost of testing; and
f) Professional fee
Following are NOT part of cost:

a) Cost of opening new facility

b) Cost of introducing a new product or service
c) Cost of conducting business in a new
location or with a new class of customer
d) Admin or other general overhead costs
e) Relocation or reorganizing cost
f) Initial operating losses

Anjum Maqsood - ACA 26

 Which of the followings are not part of cost:

(i) Relocation cost.

(ii) Initial operating losses.
(iii) Cost of introducing new product.
(iv) Cost of opening new facility.

A (i) and (ii) only

B (ii) and (iii) only
C (iii) and (iv) only
D All four
 Refer to
Activity-1
in Manual
Subsequent expenditures will be capitalized
under general recognition principle.
a) Cost can be measured reliably
b) Future economic benefits are probable

Anjum Maqsood - ACA 29

 Subsequent
Expenditure

Day-to-day Part Inspection

servicing replacement cost

Cost of Major inspection

Expensed out:
replacement is cost is capitalized
Including:
recognised by after
Labour,
derecognising derecognizing
Consumables,
the carrying previous remaining
Small parts
amount of carrying amount of
replaced item. inspection

Anjum Maqsood - ACA 30

 Refer to
Activity-2
in Manual
Depreciation: Systematic allocation of depreciable
amount of an asset over its useful life.
Useful life: Expected usage by reference to capacity,
physical output, number of shifts, technical or
commercial obsolescence, legal or similar limits.

Depreciable amount: Cost – Residual value

Depreciation period:
Starts: when assets is available for use
Ends: Earlier of the date when asset is derecognized
or when is classified as held for sale.
Depreciation method: The depreciation method
used shall reflect the pattern of benefits to be
derived.

Anjum Maqsood - ACA 32

 Depreciation begins when:

A Asset is purchased.
B Asset is available for use.
C Use of asset is started.
D All three.
 Depreciation ceases when:

(i) Asset is disposed-off.

(ii) Asset is fully depreciated.
(iii) Asset is held for sale.

A (i) and (ii) only

B (i) and (iii) only
C (ii) and (iii) only
D All three
 Depreciation charge can never be zero
except:

A In straight line method.

B In reducing balance method.

C In usage method.

D None of the above.

An item of PPE whose FAIR VALUE
CAN BE MEASURED RELIABLY may
be carried at a revalued amount
Revaluation model requires application to
ENTIRE class of PPE to which the asset belongs

Revaluations shall be made with sufficient

REGULARITY to ensure that the carrying
amount does not differ materially from that
which would be determined using fair value at
the balance sheet date.

Anjum Maqsood - ACA 36

Restated proportionately: Accumulated
depreciation is restated in proportion with
gross amount so as to bring carrying amount
after revaluation equal to its carrying amount.

Eliminated: Accumulated depreciation is

eliminated against the gross carrying amount of
an asset.

Anjum Maqsood - ACA 37

 Revaluation

Gain Loss

If loss on If
revaluation Revaluation
of such asset Otherwise: surplus Otherwise:
was charged exist
to I/S in Create against this recognized
previous Revaluatio asset: in Profit or
years:
n Surplus loss
Recognize in Charge to
Profit or loss R.S

Anjum Maqsood - ACA 38

 Refer to
Activity-3
in Manual
 Refer to
Activity-4
in Manual
 Refer to
Activity-5
in Manual
For each class of assets
 Measurement basis
 Depreciation methods
 Useful lives or depreciation rates
 Gross carrying amount and accumulated depreciation
at beginning and end of period
 Reconciliation at beginning and end of period showing
addition, revaluation, disposal and depreciation etc.
 Existence and amounts of restrictions on title to
assets.
 PPE pledged as securities for liabilities.
 Amount of expenditures on account for PPE in the
course of construction.
 Commitments for acquisition of PPE.
 Compensation from third parties for impairment.

Anjum Maqsood - ACA 42

Disclosure requirements for revalued assets:
• Date of revaluation.
• Whether independent valuer was used.
• Carrying amount of each class of revalued
PPE as under the cost model.
• Revaluation surplus, including movement
and any restrictions of distribution of
balance to shareholders.

Anjum Maqsood - ACA 43