Summary

IAS – 16
Ajmal Kanju
PPE: Depreciation: (Exp to P/L) Change in Estimates: Fixed Asset Schedule/Disclosure Note :
a. production/supply of G/s, admin use, rentals
Dep Amount: Cost – Residual value Whenever there is a change in
b. For > 1 year (All these reviewed at least
Useful Life: Time Periods or expected production 1. Useful Life of Asset Asset A Asset B Total
2. Residual Value of Asset at end of each financial year)
Residual Value: Amount expected at the end of its useful life (after
Capital Exp: deducting the estimated costs of disposal)
3. Depreciation Method Cost
4. Depreciation rate
Cost of buying fixed assets (car, machinery) → Asset
SLM: (Cost – Residual Value) * Rate, Cost – Residual Value) /U.L a) WDV at that date of change is treated as cost of asset b/d (Start of the year xxx Xxx xxx
Revenue Exp: ( If rate is not given: 1 / useful life * 100) b) Use new data (U.L, RV, Dep method dep rate) balance)
c) Then apply all the rules of depreciation as per standard (SLM,RBM)
Running the business in day to day basis RBM: CA/WDV * Rate (Cost – Acc Dep) Additions xxx Xxx xxx
(petrol, electricity) → Expense Sum of Digits: Sum of digits = n (n+1) / 2
Disposal/Deletion (xxx) (xxx)
Dep = Factor of current year / Sum of digits x (cost – R.V) Revaluation: (For whole class)
Recognition: Factor of current year = Remaining Useful Life
Note: No dep if no production
FV > CA Rev Sur FV = normally current market value Revaluation xxx xxx xxx
▪ Inflow of benefits (mustaqbil mein kamai) FV < CA Rev Loss CA = Value in FS/BS/Ledger
Production & Time (Units, hours) method :(usage /mileage method) C/d (End of the year xxx xxx xxx
▪ Measurable cost How to calculate cost to apply revaluation model?
Dep = (Cost – Residual Value) / total units produced or total balance)
1) Elimination method (Net Replacement Method)
working hours * units purchased or hours used
Initial Measurement: Depreciation Policy:
2) Restatement method (Gross Replacement Method) Accumulated
Depreciation
Elimination method
▪ At cost Time Basis: From the date of purchase to date of sale
Full Year Basis: Full in the year of purchase, no in the year of disposal 1-1ST Eliminate depreciation till revaluation b/d (Start of the year xxx xxx xxx
Thrree elements Acc dep dr, balance)
1. Purchase cost (Cost + duties + non refundable taxes
– discount ) Disposal (Sale or Destroy) : Asset Cr
2—Now it is Ca, take its diff with FV
Depreciation xxx xxx xxx
2. Directly attributable cost Agar ye asset na hota to ye 1.On disposal (on the time of its sale)or Destroyed in any accident
cost incur na hoti, asset aya h to cost incur hui h 2. When no FEB are expected from its use or disposal Asset dr (if FV is greater than CA) Depreciation (xxx) (xxx)
3. Provision for dismantling (Future mein jaga ko Disposal (Exchange) : Rev surplus Cr (Disposal/Deletion)

Ajmal Kanju
restore krna, aaj us ki present value leni h) Cost of New Asset : 3—Rev surplus/ Remaining life = R.E
C/d (End of the year xxx xxx xxx
1. FV of asset received or FV of New Asset Rev surplus dr (Incremental dep)
balance)
2. FV of asset given up FV of Old Asset +,- Payment /receipts R.E cr
Deferred Payment: 3. if both are not known
(If both FV are given then also this) When its disposal time/ all remaining rev surplus to R.E (End of U.L) Carrying Amount
WDV of Old Asset +,- Payment / receipts Date Desc Value Acc Dep NBV R.Sur Rev.L0ss P/L RE
Interest is the diff b/w then CA of asset given up
Xx xx xxx (xx) xx xx xxx xx xx
At the Start of the Year xxx xxx xxx
a. Actual payment of amount
TIA/EA = Cost of the new asset – Payment
b. Total payment made At the end of the year xxx xxx xxx
FV of asset given up is preferred but TIA is given then use this value 1.Apply depreciation rules, disposal, exchange & change in estimate rules
1. Disposal Dr 3. Bank/Cash Dr Disposal x dep x 2. If Fair value is there, apply elimination method Co Name Co Name
Subsequent Exp: Asset Cr Disposal Cr Disp cost x Cash/ 3. For Rev surplus, 1st adjust rev loss then balance in surplus if there and Other Disclosures SOFP (Extracts) SOCI (Extracts)
As at …………. FTY ………….
4. Disposal cost Dr p/l (bal) x Ins Re x vice versa (for loss, 1st adjust surplus then balance in loss) 1.cost or revaluation model
If meets the criteria 2. Acc.dep Dr Value = Asset T a/c at cost, Acc dep = Acc dep T a/c, NBV = Cost – Acc dep 2 depreciation methods Asset - PPE xxx Exp - Dep xxx
a. Improves (U.L/ capacity) Disposal Cr Bank/Cash Cr Insurance when acknowledged R.Sur = Rev Sur t a/c, Rev Loss = Rev Loss P/L = for dep FTY 3. useful lives Exp - Rev Loss xxx
Balance of disposal ledger is P/L not as other income RE = For incremental depreciation If Loss = divide over U.L for calculation only Equity - Rev Sur xxx OCI - Rev Sur xxx
b. Replacement of part (if separately depreciable part) 4. depreciation rates
Summary

IAS – 36
Ajmal Kanju
Fair Value: Carrying Amount: Impairment Loss:
Price to sell or paid in honest transaction between willing CA: Cost – Acc dep – Acc Imp Loss Recoverable Amount < Carrying Amount
sellers/buyers at some date

▪ Fair value at a specific date is its current market value. Recoverable Amount: Entry:
▪ If no active market exists, estimate amount that
could be obtain from disposal. Higher of: Imp loss dr,
▪ Selling costs include legal costs, taxes & costs necessary Acc imp loss Cr
to bring the asset into a condition to be sold 1. fair Value – Cost to sell (VIS = FV – CTS)
2. Value in Use (VIU=PV of FCF)

Value in use: Methodology:

Present value of future cash flows from using an asset, including its
eventual disposal discounted at suitable discount rate / cost of capital.
Value in Sale Value in Use Recoverable Amount Carrying Amount Impairment (RA<CA)
Estimates of future cash flows must include: (Higher of VIS or VIU)
▪ cash inflows from the continuing use of the asset;
▪ cash outflows that will be necessarily incurred to generate the xxx xxx xxx xxx xxx
cash inflows from continuing use of the asset; and

Ajmal Kanju
▪ Net disposal proceeds at the end of the asset’s useful life
Estimates of future cash flows must not include: Value in Sale (W-1) Value in Use (W-2)
▪ cash inflows or outflows from financing activities; or Y-1 Y-2 Y-3 Total
▪ Income tax receipts or payments. FV CTS VIS Inflows xx xx xx xxx
Outflows (x) (x) (x) (x)
Cash flows should not include estimated future cash flows that are Xx xx xx Net Flows xx xx xx xx
expected from:: Discount factor (1+r)^-n (1+r)^-n (1+r)^-n
▪ future restructuring to which an entity is not yet committed; or Present Value xx xx xx xx
▪ Improving or enhancing the asset’s performance.
Discount rate must be a pre-tax rate
Summary

IAS – 40
Ajmal Kanju
Investment Property: Depreciation: (Exp to P/L) Fair Value Model: (For all investment properties) Investment Property Note: Cost Model
FV > CA Gain (P/L) FV = normally current market value
Land / Building / Part of Building Dep Amount: Cost – Residual value Asset A Asset B Total
FV < CA Loss (P/L) CA = Value in FS/BS/Ledger
a. Capital Appreciation Useful Life: Time Periods or expected production Note: 1) Gain/Loss not in OCI but in P/L
b. Rentals to others
Residual Value: Amount expected at the end of its useful life (after 2) No Dep to be charged Cost
deducting the estimated costs of disposal) 3) No Imp to be charged
Recognition: SLM: (Cost – Residual Value) * Rate, Cost – Residual Value) /U.L Model of the entity is fair value and if it is not reliably measurable
b/d (Start of the year
balance)
xxx Xxx xxx

▪ Inflow of benefits (mustaqbil mein kamai) ( If rate is not given: 1 / useful life * 100)
then investment property will be measured at cost model (IAS 16)
▪ Measurable cost Additions(from other stan) xxx Xxx xxx
RBM: CA/WDV * Rate (Cost – Acc Dep) Whenever its FV becomes available, it will be shifted from cost to FV
Sum of Digits: Sum of digits = n (n+1) / 2 Disposal/Deletion (xxx) (xxx)
Initial Measurement: Dep = Factor of current year / Sum of digits x (cost – R.V)
Date Desc Value Acc Dep NBV FV G/L P/L
Transfer to other stand. xxx xxx xxx
Factor of current year = Remaining Useful Life Xx xx xxx (xx) xx xx xxx
▪ At cost
Note: No dep if no production C/d (End of the year xxx xxx xxx
Thrree elements
1.Apply depreciation rules, disposal, exchange & change in estimate rules balance)
1. Purchase cost (Cost + duties + non refundable taxes Production & Time (Units, hours) method :(usage /mileage method) if cost model as per IAS 16
– discount ) Dep = (Cost – Residual Value) / total units produced or total 2. If Fair value is there, apply Fair Value model Accumulated
2. Directly attributable cost Agar ye asset na hota to ye working hours * units purchased or hours used Value = Asset T a/c at cost, Acc dep = Acc dep T a/c, NBV = Cost – Acc dep Depreciation
cost incur na hoti, asset aya h to cost incur hui h Depreciation Policy: FV G/L = G/L on properties, P/L = for dep FTY and G/L
3. Provision for dismantling (Future mein jaga ko Time Basis: From the date of purchase to date of sale b/d (Start of the year xxx xxx xxx
restore krna, aaj us ki present value leni h) balance)
Full Year Basis: Full in the year of purchase, no in the year of disposal Investment Property Note: Fair Value Model
Depreciation xxx xxx xxx
Asset A Asset B Total
Deferred Payment: Change in Estimates: Depreciation (xxx) (xxx)
Whenever there is a change in b/d (Start of the year balance) xxx xxx xxx (Disposal/Transfer)
Interest is the diff b/w 1. Useful Life of Asset (All these reviewed at least
a. Actual payment of amount at end of each financial year) Additions (Transfer from xxx xxx xxx C/d (End of the year xxx xxx xxx

Ajmal Kanju
2. Residual Value of Asset
b. Total payment made 3. Depreciation Method other standards) balance)
4. Depreciation rate Disposal/Deletion (xxx) (xxx) Carrying Amount
a) WDV at that date of change is treated as cost of asset
Arrangements: b) Use new data (U.L, RV, Dep method dep rate) Transfers to other standards (xxx) (xxx)
Significant Portion of Building: IAS 16, IAS 2, IFRS 16 At the Start of the Year xxx xxx xxx
c) Then apply all the rules of depreciation as per standard (SLM,RBM)
Insignificant Portion of Building: IAS 40 Gain/ (Loss) xxx (xxx) xxx
At the end of the year xxx xxx xxx
Treat separately as standard for above cases Transfers: (To IAS 40 or From IAS 40) C/d (End of the year balance) xxx xxx xxx
For any asset whose fair values cannot be estimated reliably.
CA/NBV/NRV of other standards will become cost of IAS 40 and vice versa
Insignificant Portion of Building: IAS 16, IAS 2, IFRS 16 - Description of property – why fair values cannot be determined –range of FV
IAS 16 – Cost /Rev Model IAS 40
Significant Portion of Building: IAS 40 in which property may lie
IAS 2 – Cost or NRV IAS 40
Treat whole property as per IAS 40 for above cases Calculate WDV till the date of transfer then transfer Asset in New St. Dr Disposal: Other Disclosures
1.cost or fair value model
Co Name
SOFP (Extracts)
Co Name
SOCI (Extracts)
As at …………. FTY ………….
(means transfer date tak purane standard ki accounting) Asset in Old St. Cr Gain/Loss = Sale Proceeds – WDV/FV at that date 2 depreciation methods Exp - Dep xxx
(WDV)
Two parts are accounted for separately if they could be Rev Sur on asset under IAS 16 will remain in SOFP as reserve 3. useful lives Asset – Properties xxx Gain / Loss xxx
sold separately 4. depreciation rates
Summary

IAS – 20
Ajmal Kanju
 Recognition of Grant: Forgivable Loans: Grant Related to Income: Investment Property Note: Cost Model
Grants not recognized until reasonable assurance that: Expense already Incurred Treated as deferred revenue
Treated as a government grant when there is reasonable assurance that If grant is receivable
a) Conditions attached with grant will be fulfilled; and If grant is received
entity will meet the terms for forgiveness of the loan Same as discussed in related to income (Grant & repayment)
b) Grant will be received Deducted from cost of asset:
Until then, loan is treated as a liability & recognized at FV under IFRS 9
Note: Grant is received and conditions are not fulfilled Bank Dr Grant Receivable Dr
If grant is received
at inception, then Liability will be raised Low interest loans: Grant Income Cr Grant Income
When received
Cr
Bank Dr
loans which the government provides at lower interest rate as compare to Note: Give Govt grant under Bank Dr
Liability Cr
market interest rate. the head ‘Other Income’ Grant Receivable Cr Bank Dr
Loan shall be recognized and measured as per IFRS 9. Asset Cr
Benefit will be accounted for as per IAS 20. Expense to be Incurred
Govt Grant: Match Exp & Income
If grant is receivable
Inflow/transfers of resources from Govt (Local / National) Grant Receivable Dr
in return for past or future compliance with certain Related to Income (Remaining Portion) Asset Cr
conditions Separate Income Separate Exp to be incurred
When received
Repayments: When deferred Revenue
It excludes: Bank Dr
1) cannot reasonably have a value Deferred Revenue Dr Deferred Revenue - Remaining Grant Receivable Cr
(e.g. free advice and the provision of guarantees); P/L Dr Amount charged through D.Rev) if Expenses recorded Grant Receivable Dr
Full amount of Grant if no then ‘income Cr’ Expense
2) transactions with government which cannot be Bank Cr Cr Repayment
distinguished from normal trading transactions of entity When received
(e.g. a government procurement policy that is Bank If no grant had been given then the CA and Acc dep would
responsible for a portion of the entity’s sales) Repayments: Simple Cases Dr have been changed
Grant Receivable Cr
Grant Income Dr

Ajmal Kanju
Accounting: Note: Deduct Govt grant from Expenses So, now
Bank Cr
▪ No specific accounting treatment
Treated as Deferred Revenue Increase = Cost of asset Asset was recorded at low amount due to
▪ disclosure of the nature, extent and duration
deduction of grant
of the assistance
If grant is received and conditions are to be fulfilled in different time slabs
Co Name Co Name
Then Increase = Acc dep Less charged due to grant
SOFP (Extracts) SOCI (Extracts)
As at …………. FTY ………….
Govt Assistance: Bank
Deferred Revenue
Dr
Cr Asset Dr
Resources are not transferred but assistance by Asset Exp - Dep xxx
xxx P/L Dr
Govt qualifying under certain criteria Amortize Deferred Income over period in which conditions are to be met (SLM)
Grant Receivable xxx Acc Dep Cr
Grant Income xxx
Deferred Revenue Dr Bank Cr
▪ Provision of infrastructure in development areas or Income – Def.Rev xxx
▪ imposition of trading constraints on competitors Deferred Revenue xxx P/L Cr
Summary

IAS 23
Ajmal Kanju
Borrowing Cost: Specific Borrowing cost to be capitalized: Specific Borrowing :
specific funds are borrowed in order to obtain a qualifying asset.
Interest and other cost incurred as a result of borrowing of funds
Interest on Amounttobe
specific -
Investment
= capitalized
Investment Income:
Borrowing Income Any income on the temporary investment of those borrowings during that period
Qualifying Asset: General Borrowing :
▪ Takes a substantial period of time (> 1 year ) to prepare intended use or sale
General funds are borrowed and these are for the purpose to obtain a qualifying asset.
▪ Not routinely manufactured inventories (repetitive over short period of time)

Specific Borrowing cost to be capitalized: Formats Capitalization Rate :

What should be done with borrowing Cost ? Interest on Specific Borrowings Year
Weighted average of borrowings costs applicable to the entity that are outstanding during the year
Directly attributable to the acquisition, construction, or production of Qualifying Asset
Conditions: Future Economic Benefits & Reliably Measurement Loan Balance From To Outstanding Interest General Borrowing cost to be capitalized: 1 Loan
Repayments Rate
Amount Amount Date Date Months Amount Payments
Add in cost of asset otherwise expense out Interest Outstanding Amounttobe
Note: made =
1. Loan Amount: Total amount of loan 2. Repayments: To banks/Fin Inst 3. Rate: Interest from GB * rate * Months capitalized
rate 4. Outstanding Months: No of months loan were there 5. Interest: Loan Amount *
Commencement of capitalization: Rate * Outstanding Months General Borrowing cost to be capitalized: > 1 Loan
Investment Income Year
Payments
Capitalization of borrowing costs should start only when: made Capitalization Outstanding Amounttobe
=
▪ expenditures for the asset are being incurred; and
Amount Payments Balance From To Outstanding from GB * rate * Months capitalized
▪ borrowing costs are being incurred, and Invested made Amount
Rate
Date Date Months
Income
▪ activities necessary to prepare the asset have started.
Note: Capitalization Rate: Format
Suspension of capitalization 1. Amount invested: Total amount of loan 2. Payments made: For project 3.Rate: Income Capitalization Rate
rate 4. Outstanding Months: No of months investment were there 5. Income: balance
Loan From To Outstanding Loan Interest
Extended periods in which active development is interrupted Amount * Rate * Outstanding Months Description
Loans
Date Date Months Outstanding
Rate
Amount

Ajmal Kanju
▪ Activities necessary to prepare asset for intended use or sale Amount to be capitalized
ABC xx xx xx xx xx xx xx
▪ Not when technical or admin work being carried out (e.g. applying for permits) Interes Amount xxx
XYZ
MNL
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
▪ Excludes temporary delays Less : Investment Income (xxx)
xxx
xx xx

Cessation of capitalization Rate:

Total Interest
Total Loan outstanding
* 100

Usage of Funds: Format Note:

Substantially all activities necessary to prepare the asset for intended use are complete 1. Loan Description: Category of loan 2. Outstanding Months: no of months payment
Payment Schedule

▪ Physical construction complete made from general loans 3. total Interest: Sum of Interest amount column
Own Specific General Outstanding
Date Description To be Paid
Funds Funds Funds Balance
Interest on General Borrowings
▪ Minor modification my be outstanding
Note:
Or each part of that asset, if capable of being used separately 1. Date: On which payment is made 2. Description: Nature of payment 3. To be Paid: how Amount From To Outstanding Capitalization Interest
paid Date Date Months Rate Amount
much amount? 4. Payment preferences are 1st = Own, 2nd = Specific Fund, 3rd = General
▪ E.g. business park with several buildings
Funds 5. Outstanding for Specific funds only Note: 1. Amount Paid: from any general loan 2. Interest: Amount * Cap rate * Out months