Financial reporting - synthèse en anglais

Financial Reporting

Session: 3 and 4

Tangible assets and Intangible assets

Objective of IAS 16

 The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the timing of recognition of assets, the determination of their carrying amounts, and the depreciation charges to be recognised in relation to them.

 IAS 16 does not apply to biological assets related to agricultural activity or mineral rights and mineral reserves.

Recognition

 Items of property, plant, and equipment should be recognised as assets when it is probable that:

1. The future economic benefits associated with the asset will flow to the enterprise.

2. The cost of the asset can be measured reliably.

 This recognition principle is applied to all property, plant, and equipment costs at the time they are incurred.

 These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it.

Initial Measurement

 The Property, plant and equipment should be recorded at cost. Cost includes all costs necessary to bring the asset to working condition for its intended use.

 This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees for architects and engineers.

Measurement to Initial Recognition

IAS 16 permits two accounting models:

 Cost Model. The asset is carried at cost less accumulated depreciation and impairment.

 Revaluation Model. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation, provided that fair value can be measured reliably.

The Revaluation Model:

 Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date.

 If an item is revalued, the entire class of assets to which that asset belongs should be revalued.

 Revalued assets are depreciated in the same way as under the cost model.

 If a revaluation results in an increase in value, it should be credited to equity under the heading "revaluation surplus" unless it represents the reversal of a revaluation decrease of the same asset previously recognised as an expense, in which case it should be recognised as income.

 A decrease arising as a result of a revaluation should be recognised as an expense to

...