The principle issues dealt by ISAB in this standard are that ofrecognition of assets, the determination of their carrying amounts, and the depreciation charges and impairment losses to be recognized in relation to them. This standard defines property plant and equipment as:
IAS 16 principal issues involved relate to the recognition of items of property, plant, and equipment, determining their costs, and assessing the depreciation and impairment losses that need to be recognized.
The requirements of IAS 16 are applied to accounting for all property, plant, and equipment unless another Standard permits otherwise, except: Advertisement Property, plant, and equipment classified as held for sale in accordance with IFRS 5 Biological assets relating to agricultural activity under IAS 41 Mineral rights, mineral reserves, and similar non-regenerative resources Recognition Of An Asset An item of property, plant, and equipment should be recognized as an asset if and only if it is probable that future economic benefits associated with the asset will flow to the entity and the cost of the item can be measured reliably.
Any expenditure incurred that meets these recognition criteria must be accounted for as an asset. The Standard makes reference to individually insignificant items that can be aggregated. However, very often, in practice, entities adopt an accounting policy to expense items that are below a predetermined de-minimis level in order to avoid undue cost in maintaining the relevant Negatives critique on ias 16, which includes tracking the whereabouts of the asset.
The definition and recognition criteria can also be applied to spare parts, although these are often carried as inventory and expensed as and when utilized. However, major spare parts are usually recognized as property, plant, and equipment.
This was particularly the case when the replaced part was not separately identified in the overall cost of the original asset. This problem also existed for major inspection costs, such as those for ships and aircraft, which were usually required to retain sea- or airworthiness. The matter was further exacerbated by an additional recognition criterion that subsequent costs should add to the utility or useful life of the asset; in some circumstances, this criterion resulted in day-to-day repairs being capitalized.
This issue was partly addressed by an interpretation of the Standing Interpretations Committee SIC that permitted adding major overhaul or inspection costs to the original asset if an amount representing the major overhaul or inspection component of the original cost of the asset was separately identified on initial recognition and was separately depreciated, and thereby could be written out of the asset records.
The current standard applies the two basic recognition criteria referred to above to all expenditures and dispenses with the increased utility or increased useful life criteria. If the two basic criteria are satisfied, then the cost should be recognized as an asset.
If the cost of the replaced asset was not separately identifiable, then the cost of the replacement can be used as an indication of the cost of the replaced item, which should be removed from the asset record.
The estimated useful life is 10 years.
At the end of the sixth year, the power train requires replacement, as further maintenance is uneconomical due to the off-Lie Dharma time required. The remainder of the vehicle is perfectly Lie Dharma worthy and is expected to last for the next four years.
Can the cost of the new power train be recognized as an asset, and, if so, what treatment should be used? The new power train will produce economic benefits to Lie Dharma Truckers Inc. Hence the item should be recognized as an asset. Measurement at Recognition An item of property, plant, and equipment that satisfies the recognition criteria should be recognized initially at its cost.
Purchase price, including import duties, nonrefundable purchase taxes, less trade discounts and rebates. Costs directly attributable to bringing the asset to the location and condition necessary for it to be used in a manner intended by the entity. Initial estimates of dismantling, removing, and site restoration if the entity has an obligation that it incurs on acquisition of the asset or as a result of using the asset other than to produce inventories.
Examples of directly attributable costs include: Employee benefits of those involved in the construction or acquisition of an asset Cost of site preparation Initial delivery and handling costs Installation and assembly costs Costs of testing, less the net proceeds from the sale of any product arising from test production Borrowing costs to the extent permitted by IAS 23, Borrowing Costs Professional fees Examples of costs that are not directly attributable costs and therefore must be expensed in the income statement include: It has incurred these costs: Which costs of Dharma Putra Inc.
According to IAS 16, these costs can be capitalized: They should be written off to the income statement in the period they are incurred. Measurement of Cost The cost of an asset is measured at the cash price equivalent at the date of acquisition. If an asset is acquired in exchange for another asset, then the acquired asset is measured at its fair value unless the exchange lacks commercial substance or the fair value cannot be reliably measured, in which case the acquired asset should be measured at the carrying amount of the asset given up, where carrying amount is equal to cost less accumulated depreciation and impairment losses.
For impairment losses, reference should be made to IAS In this context, any compensation received for impairment or loss of an asset shall be included in the income statement.Topic: What are the positive and negative critiques of using IAS 16?
The topic of the dissertation is: "positive and negative critique with regards to IAS 16". I've worked out the positives and negatives, but can't seem to find anything regarding international recommendations. Critique On Ias 16 "Negatives Critique On Ias 16" Essays and Research Papers - doc Doc Qbanks, high-quality online practice questions and revision resources, tailored specifically for your medical examination.; library eBooks for corporate, healthcare, academic and professional. This Exposure Draft is published by the International Accounting Standards Board (IASB) for comment only. The recommendations in the draft may be • IAS 16, Property, Plant and Equipment • IAS 17, Leases • IAS 21, The Effects of .
IAS16 stands for international accounting standards 16 for property, plant and equipment. The positive critiques are: 1) It can help to locate which property or asset can be used more than once and can on a rental basis earn money. Critique On Ias 16 "Negatives Critique On Ias 16" Essays and Research Papers - doc Doc Qbanks, high-quality online practice questions and revision resources, tailored specifically for your medical examination.; library eBooks for corporate, healthcare, academic and professional.
IAS 16 - Properties, Plant and Equipment (detailed review) As per IAS 16, the cost of the asset acquired in exchange will be primarily the fair value of asset transferred± Cash, therefore the cost of the acquired plant will be: $20 million + $ 5 million = $25 million.
asked Nov 5, in IAS 16 - Property, Plant and Equipment by Natasha 0 answers What are the positive and negative international critique with respect to IAS 2 Inventories. IAS 16, ProPerty, PlAnt And equIPment overvIew There are essentially four key areas when accounting for property, plant and equipment that you must ensure that you are.
Dessertation IAS 16 LEASES. Authors. Darryll Harding.
Darryl Harding. Current critique that exists with respect to IAS 16 Property, Plant and Equipment. It is a reliable, easy to follow method, and is used worldwide. Some of the negative aspects related to IAS 16 are: 1. It does not prescribe the unit of measure for recognition of what.