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    25 views8 pages

    P.P.E. - Cfas

    Uploaded by

    Noorodden
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    Copyright:

    © All Rights Reserved
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    of 8
    238_ Chapter 9 CLASSIFICATION Asset Description Property, plant Productive assets that derive and equipment their value from long-term use in operations rather than from resale. 1, Land Real property used in operations 2. Buildings 3. Equipment 4. Land Improvements 5. Natural Resources 6. Bearer Plants (land held for speculative investment or future use IS reported as investments or other assets). _ Structures that include warehouses, plant facilities, and office buildings. Broad term that includes machinery, computers and other office equipment, vehicles, furniture, and fixtures. Enhancements to property such as parking lots, driveways, private roads, fences, landscaping, and sprinkler systems. Productive assets that are physically consumed in operations such as timber, mineral deposits, and oil and gas reserves. Living plants used in the production or supply of agricultural produce for more than one period and not sold as agricultural produce except for incidental scrap sales, Typical Acquisition Costs - All expen get the ass location for et in condit r its intended use, Purchase price, attorney’s fees, title, recording, fees, commissions, back taxes, mortgages, liens, clearing, — filling, draining, and removing old buildings. Purchase price, attorney’s fees, commissions, reconditioning or construction costs. Purchase price (less discounts), taxes, transportation, installation, testing, trial runs, reconditioning. Separately identifiable costs. Acquisition, exploration, development, and restoration costs. Apply PAS 16, par 22 which provides for the accounting Principles for “self-constructed assets” _ 240_ Chapter 9 Proper Pon and Equipment 241 Figure 0.2: Salient Provisions of PAS 16 relative to Recognition of Property, Fipwe9a Key Prevuoservasiecm Pinot cad Bquiprent. eeu OTRAS 16 relative t Measurement of Property ecognten Property, plan ana equpentrecogniaed when [tis probate mat bette The cost lhe item can be conor Benes sesocated wh treasures reliably cc" ha asset low bo fe enterrion I cary ateost | [cary atrevaled amount | [far valve prior to IAS 16, Te: fprchased then tis italy tess being fa valu atthe rmustbe these were Te. when teaches ts locaton recognized ateott accumulated | | dateotrevauatonless | | — reiatly refered to a8 and condtion necessary fi depeeation any subeaquet measurable |_| "benchmar’ and tr capabie nto by Beents of east and any secumulted by “aerate management accumulated | | deprecison and ary | | protessional | | tesiments imparment | | accumulated parent | | vehes respectively Iosses losses [ avcice price incuding sellconstucted assets rectly atibutable costin tmport des and non beng the product ots so retncabic tes ‘resent locaton ond Accounting for depres condion and opertedin | anne’ itended ‘lasets wih Srodaee | | Resdvelvaueondusets | [Repaid atid wet ‘locales We mustbe evewes et | | maintenance do wince cot ot fie wet | | stemateaty ore | | eveyyearerd. Any | | rtrerove be labour, material and wees | | wsetleoironc | | cwngeswitte vested | | netic onde her excusing ary eons | | Mearderaedas | | change axing eprecaton pots (Giecomnes, | | avewerseinte | | sales adtesinen som) eons statement vnderPASB I [se invaldebvey | [ tesingana | [ rstataten and | [ professions! eperaton | | andhancing | | iitalsetup | | assembly costs fees costs 244 Chapter 9 ee Land Improvements Land improvements are depresisbe ite enhancements tha re Not permaneny, including driveways, parking los, pave roads fencing. and landscape “though parking lo appears to be permanent is sbjet to weather damage fequires maintenance, and must eventually be replaced. The cost of tang Improvements is not added to the land account but rather is capitalized to the land improvements account and depreciated over periods benefited by their une Leasehold Improvements Sometimes a lessee will make improvements to leased property that reverts back to the lessor at the end of the lease. Ifa lessee constructs a new building or makes modifications to existing structures, that cost represents an asset just like any other capital expenditure. Like other assets, its cost is allocated as depreciation expense over its useful life to the lessee, which will be the shorter of the useful life of the asset or the lease term. Theoretically, such assets ean be recorded in accounts descriptive of their nature, such as buildings or plant. In Practice, the traditional account ttle used is leasehold improvements. In any case, the undeprecisted cost usually is reported in the statement of financist Position under the caption property, plant, and equipment, Movable assets like office furniture and equipment that are not attached to the leased property are not considered leasehold improvements Natural Resources ‘Natural resources that provide longterm benefits are reported as property, plant and equipment. These include timber tracts, mineral deposits, and oil and gas deposits. They can be distinguished from other assets by the fact that thet Kenefits are derived from their physical consumption. For example, mineral deposits are physically diminishing a the minerals are extracted from the ground an citer sold or used in the production process. On the eontrary, equipment land, and buildings produce benefits for a company through thelt ate tn the Production of goods and services. Unlike those of natural resources, their Physical characteristics usually remain unchanged during thei useful lives Natural resources sometimes are purchased from anoth initial valuation is simply the purchase bring the asset to condition and locati are developed. In these situations, costs, (b) exploration costs, and (e) d ler company. In that case, Price plus any other costs necessary 10 ion for use. More frequently, these assets initial valuation can include (a) acquisition evelopment costs. Acquisition costs are the _ amounts paid 10 acquire the oF fo extract proven natura as drilling a well o excava Ppt ant cad Equipment 248. 's 0 explore for undiscovered natural resources, "ourees. Exploration costs are expenitutes stich “lito 188 rin as well as any other costs of searching for Fe oe ecteepment coms are cared Se cea discovered but before production fee be action has begun, They include the costs of tunnels, sree and shat. ‘The coat of hey squipmee wes ake een %

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