_ Non-current Assets Chapter learning objectives + Explain and apply the accounting rules contained in IASs dealing with: tangible non-current assets; research and development expenditure; intangible non-current assets (other than goodwill on consolidation); ‘ impairment of assets. 339OO _———— Non-current Assets 21AS 16 Property, Plant And Equipment Property, plant and equipment are tangible assets that: * are held by an enterprise for use in the production or supply: services, for rental to others, or for administrative purposes; * are expected to be used during more than one period. You should know these definitions from your earlier studies. You! ensure that you know all of the following definitions for your exami Carrying amount The amount at which an asset is recognised, after deducting a accumulated depreciation and impairment losses. Also refer value. Cost The amount paid and the fair value of other consideration an asset at the time of its acquisition or construction,pepreciable amount aaa chapter13 ne cost or valuation of 2n asset less its residual value pepreciation matic allocation of th syste! 1e depreciable amount of an asset over its The) useful life fair value amount for which an asset can be exchanged between knowledgeable, The q ties in an arm's length transaction. willing Pt impairment loss the amount by which the carrying amount exceeds its recoverable amount. recoverable amount re higher of an asset's net realisable value and its value in use. Residual value she residual value of an asset is the amount that the entity would currently dhiain from disposal of the asset, after deducting the estimated costs of Gsposal, assuming that the asset was already atthe point where it would be tisposed of (using the age and condition that would be assumed to apply at the time of disposal). Useful life IAS 16 defines useful life as the period over which the asset is expected to be available for use by the entity or the volume of output expected from the ~ asset. Initial recogniti Property, plant and equipment should be recognised as an asset when: + itis probable that future economic benefits will fow to the entity + the cost of the asset can be measured reliably. 341od The asset should initially be measuret + its purchase price: = directly attributable co eceseary for itto be capable © © preparation, inital delivery costs, professional fees; = the initial estimate of the restoring the site, where to bring the asset to the local ey Ie of operating for its intend installation costs, testi ismantling and removin cost of di g and ligation to incur si there is an ol The cost of a self-constructed asset is determined using the sé principles. liture \diture should be capitalised when: Subsequent expen + the expenditure improves the future economic benefits that generate; + replaces a component of an asset and the carrying amount component replaced is derecognised; a + itis the cost of a major inspection for faults and the ca the previous inspection is derecognised. The costs of day-to-day servicing should be recognised in the it statement as incurred. ‘ Tete eco as Which one of the following should be accounted fc ital expenditure? for as capital The cost of painting a building The replacement of windows in a building The purchase of a car by a garage for resale Legal fees incurred on the purchase of a building DOODxsis D because th he answer Is ms le legal fe | The tie. directly attributable costs to tan Bart ofthe initial cost of the asset ; th The revaluation reserve for the land would now be released into profits as the gain is now realised. Dr Revaluation reserve Cr Retained eamings This would be shown on the SOCIE.