Example cost of PPE Jsungi Lid bout a machine for S70 000 (VAT ire, pcr oa 5% trace dscount. Transportation costs J»nourto RS 000, ané an independent engineer took hours (a REOD an hou to fisale instalation [resting ot me macrine cost 0.000 (he carps rom hs testing phaso wore soa of for 6.00). in aciter. mt pent REO 000 on adverting the product; however inal demaré resulted losses of }e30 000 cvee st 3 mons Jrequires: Jvnatis te vat te catalan? lsonuton: [costs to capitatco + Purchase price oes: rade lecourt ‘Transport = Engineee + Testing phase © Agvartsng => specticaty excludes tela loses => cette not [Exampie- major nspections rod tie aceuted a mache lor Ret. The expacod ust ect the racine i 20 yes, povided int a major inspection Is perlormed avery 4 years. The estimated cost afte fist Inspect I Jat00 000, |Require: |wat wou fe) cepreciation be each yar based on sbove and (s) whats ipa If the irspacton is [score at ent ot yoar 3 (cost 700.000) sohuton: (2) Depriaon per years calculated as folloms: Machioe fs00 000207) Inspecton costs {ron on yar (©) Disclosure wou ook tke this CCanyieg amount at bglrring (of you 3) (Cost pecdece (re000-2) CCantatsation ot inspection costs (new) erecogiter onal inspection costs [H09 000-25 00039 Depreciation CCanyieg amount at on (ot year 3 ‘Cost Acc dese 140 000-25 0009} +7000) [Erampe- deterred settorent farms Jae Lc purchases a machine for tm, bt ue tcach constrains the see lows he company to Jay the machine in ene year’s tre who normal critters ave oly 3 mor (fa leount ates ic pa before tax) |sanuton: [cost of racine ie (1000007110) 908091 terest recognised over the year {1 0m 00m 029024) ‘90900 PPE Pago 115PPE [Example - exchange of assets: Halo Li exchanges a mactire wid Chal Lid. The respective nfo foreach machine is: Ganyog amount Farvake |sonauons (2) Halo wit resogise he row mactine al a cost of R15 000 => FV ol im GIVEN UP Halo’ books at 16 000, ‘in Halo books at R10 000 (©) Whiats machine is consderad more relevathan Hal then woul recogriserew machine (€) tts rot possible to determine the fa value cf ether machine ther new mactine wou be recegised (@)_ transaction lacks commercial substance then rew achive wil also be recegrised at 10.000 Halo 10000 15000 chet [Example - doprecation methods Joost ot ecupment Jresicual vac [use ton years) JRequirea: |Cotamine copocition using (a) aight iro, (b) reducing balance a) sumo gts |sanuton: (a) Staighttine {(s0n000 20009 ya} (©) Recvcing balance Year sa0000 20000 ys Year2 ——_(eo0000 0000 12000094 ys Year3——_((soa000 20en0 120000 $000) ya Year ((so0000 70en0) 20000 000087800) (0 Sumataigts Year (00600200064) Year? (00000 20003} Year3_(Go00002one0y10%2] Year4 (00000 2000071071 500 000 "20000 120000 ‘90000 61500 0625 182000 144 000 ‘96000 48000 [Exampie-revatualion: gross vet riornaton applying toa machine cf Mastor Lid Cost price (on + an 2000) ‘ze depr 1 31 Dee 2001 Ucolu on yoars, saint ine method) Yearere |x the bogrning 2002 he machine wae rovalued at are replacement valve of 120 000, [stow he ettoc ofthis revaluaon using (a) gross method and (rot replacement method |soruton: (a) Revalued amourt tv200008"0) ‘ec dept {nso000072] Revises camyirg amount (©) Revatued amourt ‘ec dep Caryng amount ‘Revaluation surplus (equity) valuation sues (ec) (20000 new vale 20000 ean am Pago 208PPE [Example - revaluation : gross v net Joompany purchased PE 4 years azo or R100 600, wich was being depreciate over 10 years. Ane Jo et year4, th company decides fo avalue PPE. The cayng amcunt hon wn AO OOD are he et -slacement cost was considered tobe R75 000 ural ent'9s and dislesure cts revaluation using (a) gross metneéan¢ (2) net replacement sotuwan: (2) Revise gross replacement cost soon gane"T0y x ‘ec dept {restonoj4y5 Journal ens: or PPE. cr ‘ec copr cr Fvaluation suplss (©) Journal nies: br PE atrevalucd amount or rec doce cr PPE at cost cr evaluation supiss Disetosure ‘Canyng amount t beginning of year (year 4) evaluation Depreciation - year Canning amount at and of yer (yea 4) Gross caryrg amount ee dene Depreciation - years {v2s000 oy] an (rscoM Garying amour tort yea (year) Gross caring amount ee denr 125 00 50 000 ‘25000 10000 15000 75000 40000 100 000 15000 Gross Net 70000 70000 Fo0-000 00 000 (0000) 30.000] 15000 15000 (0000) (00 000] 75.000 75000. 725.000 75,000 50000] (2500) (1200) ‘62500 2500 725000 "75000 (2500) (12 500] [Example subsequent revelations [amacrine wit a cost of R200 00 ane a usu lt of years was acquired at beginning of 2008. The Jmacrine i revalued every 2 years. The net replacement values a7e as follows: Becin + 2006 2008 ow sonuton: Cost Dep 208 {e0onen ye 2005 {eoo00a ye Carrying value at end of 2005 evaluation irerease - 09 via rvalaton surplus (uit) Revised earryng value at beginning of 2006, ‘006, Dep : (1e0000 9) 2007 {n60000% ‘Carrying value at end 2007 evasion ocense Fevised carrying value at beginning of 2008, eps = 2008; (esooniy 008, ‘Carrying value at end of 2008 evaluation incre Revised carrying value at beginning f 2010, notes 1 This goos orovaiation surplis in charges in equity 210.00 ofthe éecrease qos agar the revauaon surplus andthe balance of RI 657 ‘00s income statement 3.1667 wligoto Income statement as Income and he romaring EES wil oa revahaton surplus (ui) PagesPPE [Exemple - revaluations and deferred tax: Jus Ld extract rom TB at 31 Oso 2008 shows: {Lae at cost (1 Jan 2001) Bulings = abeost(t Jan 2001) ace dar to 31 Dec 2004 (8% depe pa strlght ine) Equipment + ateost (1 Jen 2001) + ase prio 31 Dec 204 (10% dope pa straght ie) Delere to (nlance sheet) ~ 81/1214 fll veto ecupment | sactinal in (1) Tacrato 29%; whore aplicable CGT is appleabio (@) Bulking allwarce or wear and ea i Spa sah ine (8) Equipment wear and tears 20% pa slg tine (4) Taxvalue of equpmont at 31 Doc 2004 = Ra 6m (6) PEs rovaued every 4 years are has yet be cone In 2005 revaiafens apply tom benining olmoyear (8) Gives rplacemont costs on 1 Jan 2005 ae: and Bulinge Equipment (2) Use ves have rot changes ar residual vaties are negaible (@)_NOR recorves ave cry roasod when assat i colddlposod of (@) Company ciecoeesrevaluatins using the net replacement method ‘Show tne calelatons lr dotemriaton of rovalued arounts a deoge as wel as te now etetoe ac balance at 91 Dec 2005, sotto: +0000 000 4200 000 18000000 7200 090 2088000 38000000 30000 090 24000 000, an: Tota Feanaton We Wi lovarsians. Tac 00, Ta oc 00, Taco 0, lovataii2ns: 0c 00. ‘000 coo acon. “eo00 ato Dif Brae 65) ‘3000 000 “60000 Detoredtnx on andle ALWAYS at CGT le yu canon evr sl Its re rove hal ges ro to aca ta lasts out Reason We Ww TO) lovarainans: TE 0. Tea 000 Teo lose {sce 000) 1450 0) (1050000, 1050000) 40000) Jovaraians. 72500008 750 000 457500. 75750000 6750000 fro: Delerednx on ling uu te ae sen Now you USE eae a etary he ‘ale tous or dlored te pups a> BUT lease role Bis wes o9 smn dra ete wellbore ered tet is exempt "Netreplacomentva ve i revo os extultod as ons ‘Gees replacement “ot ro fo (nye) “Therlr az dept 31 Dee 2004 woud have been ‘There net tepacement vale = evan en = 24002020 = 6208000 Deprelton “Tota coum Feeooe000675| ‘evaiton {rasoo00 ers] We Hexaooent 67 wv fe100000072y) |. _meopening axvalue = nslor vue because SARS ard accountng ae he eae |cxurmere Tout Tewaaton co We i lovaraians: 7a 060 = 79305 coo a00 000 "7200 000 [scvaston 3600000 3600 o00 ‘600000 Jose ‘era 000, 1600 000) 1200000, 109000) 1 2000. loverainans. 200.000 3000 coo 000000 = 7200000. TTaonn000 20 nos V> Tak = ongnaeg Page otPPE Pogo S18