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Questions and Answers

Which of the following best describes property, plant, and equipment?

  • Tangible non-current assets (correct)
  • Tangible current assets
  • Intangible current assets
  • Intangible non-current assets

    • When is property, plant, and equipment recognised as an asset?

  • When it is improbable that it will yield future economic benefits and its cost can be measured reliably
  • When it is improbable that it will yield future economic benefits and its cost cannot be measured reliably
  • When it is probable that it will yield future economic benefits and its cost can be measured reliably (correct)
  • When it is probable that it will yield future economic benefits and its cost cannot be measured reliably

    • What is the purpose of depreciation?

  • To allocate the entire cost of an asset in the year of purchase
  • To allocate the depreciable amount of an asset over its useful life (correct)
  • To increase the carrying amount of an asset
  • To decrease the carrying amount of an asset

    • What is investment property?

    <p>Tangible non-current assets held for the purpose of earning rental income or for capital appreciation or both</p> Signup and view all the answers

    What happens to revaluation gains and losses for property, plant, and equipment?

    <p>Revaluation gains are credited to a revaluation reserve and recognised as other comprehensive income in the statement of comprehensive income, and losses are recognised as an expense when calculating profit or loss for the period</p> Signup and view all the answers

    What is the criteria for recognising property, plant, and equipment as an asset?

    <p>When it is probable that it will yield future economic benefits and its cost can be measured reliably</p> Signup and view all the answers

    What are the purposes for holding property, plant, and equipment?

    <p>For use in the production or supply of goods or services, or for rental to others or for administrative purposes</p> Signup and view all the answers

    What is the basis for measuring property, plant, and equipment initially?

    <p>Cost</p> Signup and view all the answers

    What are the two models that an entity may apply to measure property, plant, and equipment subsequently?

    <p>The cost model or the revaluation model</p> Signup and view all the answers

    What is the purpose of depreciation?

    <p>To allocate the depreciable amount of an asset over its useful life</p> Signup and view all the answers

    What should be reviewed at regular intervals when calculating depreciation?

    <p>Residual values and lengths of useful lives</p> Signup and view all the answers

    What is the criteria for capitalising borrowing costs?

    <p>Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset</p> Signup and view all the answers

    How should government grants relating to the acquisition of an asset be recognised?

    <p>As income over the useful life of that asset</p> Signup and view all the answers

    What is investment property?

    <p>Land or buildings held for the purpose of earning rental income or for capital appreciation or both</p> Signup and view all the answers

    What are the two models that an entity may apply to measure investment property subsequently?

    <p>The fair value model or the cost model</p> Signup and view all the answers

    What happens to revaluation gains and losses for investment property?

    <p>Revaluation gains and losses are recognised in profit or loss for the period</p> Signup and view all the answers

    What is the main purpose of holding property, plant, and equipment?

    <p>To supply goods or services only</p> Signup and view all the answers

    When is property, plant, and equipment recognised as an asset?

    <p>When it is probable that it will yield future economic benefits and its cost can be measured reliably</p> Signup and view all the answers

    What is the basis for measuring property, plant, and equipment initially?

    <p>Cost</p> Signup and view all the answers

    What should be reviewed at regular intervals when calculating depreciation?

    <p>The residual value of the asset</p> Signup and view all the answers

    What is the criteria for capitalising borrowing costs?

    <p>Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset</p> Signup and view all the answers

    How should government grants relating to the acquisition of an asset be recognised?

    <p>As income over the useful life of that asset</p> Signup and view all the answers

    What is the basis for measuring investment property initially?

    <p>Cost</p> Signup and view all the answers

    What are the two models that an entity may apply to measure property, plant, and equipment subsequently?

    <p>Fair value model and cost model</p> Signup and view all the answers

    What happens to revaluation gains and losses for property, plant, and equipment?

    <p>Revaluation gains are credited to a revaluation reserve, and revaluation losses are recognised as an expense</p> Signup and view all the answers

    What is the purpose of property, plant, and equipment?

    <p>To generate rental income and supply goods or services</p> Signup and view all the answers

    Study Notes

    Property, Plant, and Equipment

    • Property, plant, and equipment are recognised as assets when it is probable that future economic benefits will flow to the entity and the cost of the asset can be measured reliably.
    • The criteria for recognising property, plant, and equipment as assets include:
      • It is probable that future economic benefits will flow to the entity
      • The cost of the asset can be measured reliably
    • The purposes for holding property, plant, and equipment include:
      • Using them to produce goods or services
      • Renting them to others
      • Holding them for sale in the ordinary course of business
      • For administrative purposes
    • The initial measurement basis for property, plant, and equipment is at cost.
    • Two models can be applied to measure property, plant, and equipment subsequently:
      • Cost model
      • Revaluation model
    • Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
    • The purpose of depreciation is to allocate the cost of a tangible asset to the periods in which the asset is used.
    • When calculating depreciation, the following should be reviewed at regular intervals:
      • The asset's residual value
      • The asset's useful life
      • The depreciation method
    • Borrowing costs can be capitalised when an entity meets specific criteria, including:
      • The borrowing costs are directly attributable to the acquisition of a qualifying asset
      • The borrowing costs can be directly measured
    • Government grants relating to the acquisition of an asset should be recognised as income when the conditions of the grant are met.

    Investment Property

    • Investment property is property held to earn rentals or for capital appreciation, or both.
    • The initial measurement basis for investment property is at cost.
    • Two models can be applied to measure investment property subsequently:
      • Cost model
      • Fair value model
    • Revaluation gains and losses for investment property should be recognised in profit or loss, except for those that are recognised in other comprehensive income.
    • The main purpose of holding investment property is to earn rentals or for capital appreciation, or both.

    Common Aspects

    • Revaluation gains and losses for property, plant, and equipment should be recognised in other comprehensive income, except for those that are recognised in profit or loss.

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    Description

    Test your knowledge on Property, Plant and Equipment with this informative quiz! Learn about the definition and recognition criteria of these tangible non-current assets, as well as their disposal procedures. Discover the importance of measuring their cost reliably and the economic benefits they can yield. Put your understanding to the test and ace this quiz!

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