IAS 16 PPE EXAM QUESTIONS & ANSWERS 2024/2025
what is PPE - ANSWERStangible assets that are
- held for use to produce goods/services, for rental, or for admin purposes
- are expected to be used during more than one period
when is the cost of PPE recognized - ANSWERS- probable that future...
- held for use to produce goods/services, for rental, or for admin purposes
- are expected to be used during more than one period
when is the cost of PPE recognized - ANSWERS- probable that future economic benefits associated with
the item will flow to the entity
- the cost of the item can be measured reliably
what is the difference between PPE and inventory - ANSWERS- Are held for use to produce/supply goods
and services, for rental to others, or for admin purposes AND
- PPE must be used for more than one period
e.g.
- spare parts/servicing equipment = inventory
- major spare parts/stand-by equipment = PPE when expected to be used more than one period or it
can be used only in connection with an item of PPE
How is PPE measured and recoreded under IFRS - ANSWERSAt cost less depreciation
OR using the revaluation model
What is the revaluation model - ANSWERSat each revaluation date PPE is revalued to fair value
- revalued amount is amortized over the remaining useful life of the PPE
- doesn't have to be done every year (the revaluation) but needs to be frequent enough that carrying
amount doesn't differ materially
- Carrying value under this approach = FV at date of revaluation - acc dep and acc impairment losses
- if one item is revalued the entire class of PPE is revalued at the same date e.g. if one building is
revalued, all buildings need to be revalued
, What are the recognition criteria for PPE - ANSWERS- it is probable that future economic benefits will
flow to the entity AND
- the cost of the item can be measured reliably
Where do gains and losses go under revaluation method - ANSWERSInitial Revaluation
o gains - goes to other comprehensive income - revaluation surplus (OCI)
o loss - goes to profit & loss (P&L)
subsequent revaluation
o gains - goes to P&L to the extent of reversing previous losses; the remainder goes to OCI
o losses - goes to OCI to the extent of reversing gains in OCI; the remainder goes to Net Income
What are the advantages to the revaluation method - ANSWERSHigher asset value = stronger balance
sheet
Better debt to equity
Better comprehensive income if asset
increase in value
What are the disadvantages to the revaluation method - ANSWERSHigher amortization = lower net
income
Losses go through P&L
No benefit on ultimate sale since asset
already valued at FV; little or no gain on
sale of asset on P&L
What costs can be included in PPE (amortized) - ANSWERS- purchase price
- costs directly attributable to bringing the asset to location and condition necessary to use it
- estimate cost of dismantling, removing, or retiring the site where PPE is located (asset retirement
obligation)
- delivery and handling costs
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Bensuda. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
