IAS 16: Property, Plant, and Equipment Quiz
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IAS 16: Property, Plant, and Equipment Quiz

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Questions and Answers

What are the main recognition criteria for an item to be recognized as property, plant, and equipment under IAS 16?

The item must meet the definition of property, plant, and equipment and satisfy the probability recognition criteria.

Explain the treatment of subsequent costs for property, plant, and equipment under IAS 16.

Subsequent costs are capitalized if it is probable that the future economic benefits associated with the cost will flow to the entity and the cost can be measured reliably.

What are the two acceptable methods for measuring the carrying amount of property, plant, and equipment under IAS 16?

Cost model and revaluation model

How does IAS 16 require the depreciation of property, plant, and equipment to be calculated?

<p>Depreciation should be calculated using the straight-line method unless another method is more representative of the pattern of consumption of the future economic benefits embodied in the asset.</p> Signup and view all the answers

Study Notes

Recognition Criteria for Property, Plant, and Equipment

  • An item is recognized as property, plant, and equipment if it meets the definition of an asset, is probable that future economic benefits will flow to the entity, and the cost of the item can be reliably measured.
  • The item must be expected to be used during more than one period.
  • The item must be tangible.

Treatment of Subsequent Costs

  • Subsequent costs are only capitalized if they meet the recognition criteria for an asset.
  • Subsequent costs that do not meet the recognition criteria are recognized as an expense when incurred.
  • Day-to-day servicing costs are recognized as an expense when incurred.

Measurement of Carrying Amount

  • The two acceptable methods for measuring the carrying amount of property, plant, and equipment are:
    • Cost model: carrying amount is the cost of the asset minus accumulated depreciation and accumulated impairment losses.
    • Revaluation model: carrying amount is the fair value of the asset at the date of revaluation minus accumulated depreciation and accumulated impairment losses since the revaluation.

Depreciation of Property, Plant, and Equipment

  • Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
  • The depreciable amount is the cost of the asset minus its residual value.
  • Depreciation is calculated by dividing the depreciable amount by the useful life of the asset.
  • Depreciation is recognized as an expense in the income statement.
  • The method of depreciation used must reflect the pattern of consumption of the asset's economic benefits.

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Description

Test your knowledge of IAS 16 with this quiz that covers recognition criteria, subsequent costs treatment, carrying amount measurement, and depreciation calculation for property, plant, and equipment.

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