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Questions and Answers
Which type of assets represents goods that have been bought or produced during the year but have not been sold at the end of the year?
Which type of assets represents goods that have been bought or produced during the year but have not been sold at the end of the year?
Which type of assets are used by the company to run its business, such as machineries and buildings?
Which type of assets are used by the company to run its business, such as machineries and buildings?
Which type of assets are intangible assets used in production, such as trademarks, company names, or software?
Which type of assets are intangible assets used in production, such as trademarks, company names, or software?
According to IFRS 9, which types of assets are regulated?
According to IFRS 9, which types of assets are regulated?
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Which of the following is NOT a criterion for the determination and classification of assets?
Which of the following is NOT a criterion for the determination and classification of assets?
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What are fixed assets primarily used for?
What are fixed assets primarily used for?
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How are property, plant, and equipment (PP&E) initially measured?
How are property, plant, and equipment (PP&E) initially measured?
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Which principle does OIC 16 provide only the cost valuation model for?
Which principle does OIC 16 provide only the cost valuation model for?
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Which principle allows revaluation defined by law?
Which principle allows revaluation defined by law?
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Which principle states that lands are not subject to depreciation?
Which principle states that lands are not subject to depreciation?
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Which method is used to allocate the cost of an asset over its useful life?
Which method is used to allocate the cost of an asset over its useful life?
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When does the depreciation of an asset begin?
When does the depreciation of an asset begin?
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What happens to the depreciation of an asset when it is classified as held for sale?
What happens to the depreciation of an asset when it is classified as held for sale?
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When should the residual value and useful life of an asset be reviewed?
When should the residual value and useful life of an asset be reviewed?
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Which method of accounting for property, plant, and equipment allows for revaluation based on fair value?
Which method of accounting for property, plant, and equipment allows for revaluation based on fair value?
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When should the cost of a self-constructed asset be determined?
When should the cost of a self-constructed asset be determined?
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What happens to the carrying amount of property, plant, and equipment under the cost method?
What happens to the carrying amount of property, plant, and equipment under the cost method?
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When should revaluations of property, plant, and equipment be made?
When should revaluations of property, plant, and equipment be made?
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Which of the following items are recognized as property, plant and equipment according to this IFRS?
Which of the following items are recognized as property, plant and equipment according to this IFRS?
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When are items such as spare parts, stand-by equipment, and servicing equipment recognized as inventory?
When are items such as spare parts, stand-by equipment, and servicing equipment recognized as inventory?
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How are property, plant and equipment costs evaluated under this recognition principle?
How are property, plant and equipment costs evaluated under this recognition principle?
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What is the cost of an item of property, plant and equipment?
What is the cost of an item of property, plant and equipment?
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Which of the following methods can be used to calculate depreciation?
Which of the following methods can be used to calculate depreciation?
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When should the depreciation method applied to an asset be reviewed?
When should the depreciation method applied to an asset be reviewed?
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What factors can contribute to the impairment of a fixed asset?
What factors can contribute to the impairment of a fixed asset?
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How is the recoverable amount of a fixed asset calculated?
How is the recoverable amount of a fixed asset calculated?
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Which one of these is the correct definition of PPE?
Which one of these is the correct definition of PPE?
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Which one of these is the correct definition of cost?
Which one of these is the correct definition of cost?
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Which one of these is the correct definition of useful life?
Which one of these is the correct definition of useful life?
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Which one of these is the correct definition of carrying amount?
Which one of these is the correct definition of carrying amount?
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According to IAS 16, can changes in value of assets be compensated at the portfolio level?
According to IAS 16, can changes in value of assets be compensated at the portfolio level?
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According to IAS 16, how should the impairment of an asset be recorded?
According to IAS 16, how should the impairment of an asset be recorded?
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According to IAS 16, how should a loss and a reimbursement be recorded for a partially destroyed plant?
According to IAS 16, how should a loss and a reimbursement be recorded for a partially destroyed plant?
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According to IAS 16, when should the carrying amount of an item of property, plant and equipment be derecognized?
According to IAS 16, when should the carrying amount of an item of property, plant and equipment be derecognized?
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Study Notes
Assets Classification
- Inventory represents goods that have been bought or produced during the year but have not been sold at the end of the year.
- Property, Plant, and Equipment (PP&E) are used by the company to run its business, such as machineries and buildings.
- Intangible assets used in production, such as trademarks, company names, or software, are classified as Intangible Assets.
Regulation and Valuation
- IFRS 9 regulates Financial Assets.
- OIC 16 provides only the Cost Valuation Model for PP&E.
- The Revaluation Model allows revaluation defined by law.
- The Cost Principle states that lands are not subject to depreciation.
Depreciation
- Depreciation allocates the cost of an asset over its useful life.
- Depreciation begins when an asset is available for use.
- When an asset is classified as held for sale, its depreciation ceases.
- The residual value and useful life of an asset should be reviewed annually.
Property, Plant, and Equipment (PP&E)
- PP&E is initially measured at cost.
- The Revaluation Model allows revaluation based on fair value.
- The carrying amount of PP&E under the Cost Method remains unchanged over time.
- Revaluations of PP&E should be made regularly.
Recognition and Cost
- Items such as spare parts, stand-by equipment, and servicing equipment are recognized as Inventory.
- PP&E costs are evaluated under the Recognition Principle.
- The cost of an item of PP&E includes all costs necessary to bring the asset to its present location.
- Depreciation methods include the Straight-Line Method, the Reducing Balance Method, and the Units-of-Production Method.
Impairment and Derecognition
- Factors contributing to the impairment of a fixed asset include physical damage, changes in market, and obsolescence.
- The recoverable amount of a fixed asset is the higher of its fair value less costs to sell and its value in use.
- The carrying amount of PP&E should be derecognized when it is no longer expected to generate economic benefits.
Definitions
- Property, Plant, and Equipment (PP&E) are tangible items held for use in the production or supply of goods or services.
- Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset.
- Useful Life is the period over which an asset is expected to generate economic benefits.
- Carrying Amount is the amount at which an asset is recognized in the statement of financial position.
IAS 16
- Changes in value of assets cannot be compensated at the portfolio level according to IAS 16.
- Impairment of an asset should be recorded as an expense.
- A loss and a reimbursement should be recorded for a partially destroyed plant according to IAS 16.
- The carrying amount of an item of PP&E should be derecognized when it is no longer expected to generate economic benefits.
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Description
Test your knowledge on how to compensate for opposing movements in asset values according to IAS 16. Learn about the limitations on portfolio level compensation and the possibility of compensating impairment with previous revaluation.