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  • PPE Modes of Acquisition Part 1

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    May May
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    This document outlines 5 modes of acquiring property, plant and equipment: 1) cash basis using cost price and direct costs, 2) deferred/installment basis using present value of future cash flows, 3) on account with cash discounts using invoice price less discounts, 4) issuance of shares using fair values then par value creating potential share premium, and 5) issuance of bonds using fair values then face value. It provides accounting guidance for properly valuing different types of acquisitions.

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    PPE-Modes-of-Acquisition-Part-1

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    This document outlines 5 modes of acquiring property, plant and equipment: 1) cash basis using cost price and direct costs, 2) deferred/installment basis using present value of future cash flows, 3) on account with cash discounts using invoice price less discounts, 4) issuance of shares using fair values then par value creating potential share premium, and 5) issuance of bonds using fair values then face value. It provides accounting guidance for properly valuing different types of acquisitions.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    2 views1 page

    PPE Modes of Acquisition Part 1

    Uploaded by

    May May
    This document outlines 5 modes of acquiring property, plant and equipment: 1) cash basis using cost price and direct costs, 2) deferred/installment basis using present value of future cash flows, 3) on account with cash discounts using invoice price less discounts, 4) issuance of shares using fair values then par value creating potential share premium, and 5) issuance of bonds using fair values then face value. It provides accounting guidance for properly valuing different types of acquisitions.

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    © All Rights Reserved
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    of 1

    Modes of Acquisition of Property, Plant and Equipment

    (PART 1)
    1. Cash Basis
    Cost = Cash Price equivalent + Direct Attributable
    Costs
    2. Deferred/Installment Basis
    Cost = Cash Price equivalent + Directly Attributable
    Costs
    Note:
    • The difference between the cash price equivalent and
    the total payment shall be recognized as interest
    expense over the credit period.
    • In case the cash price equivalent is not available,
    compute for the present value of the future cash
    flows using an imputed interest.
    3. On account with available cash discounts
    Cost = Invoice price – Cash Discount whether taken or
    not
    4. Issuance of shares
    The property shall be initially measured in the order of
    priority:
    1. Fair value of the property received
    2. Fair value of the shares issued
    3. Par value or stated value of shares issued.
    In case there is an excess of par, the same shall be
    recognized as share premium.
    5. Issuance of bonds
    The property shall be initially measured in the order of
    priority:
    1. Fair value of bonds issued.
    2. Fair value of the property received.
    3. Face value of the bonds issued.

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