[经济学]BNAM 21020 Tangible Assets.ppt

ACCOUNTING FOR FIXED ASSETS,Tangible Assets,Regulation,IAS 16 Property Plant Equipment IAS 23 Borrowing Costs IAS 40 Investment Property Additional Reading: IFRS 5 Non Current Assets Held for Sale and Discontinued Operations Revaluation Decreases,Tangible Assets IAS 16,Asset (purchased or constructed) held for use one year Held by an enterprise for use In production For rental For administration,Balance Sheet,What is the cost of an asset? Does cost include interest charges?,What counts as cost / value?,Cost purchase price + costs to bring asset to working condition, Purchase price Import duties Directly attributable costs bringing to working condition Site preparation Delivery costs Installation costs Professional fees Dismantling and restoring site IAS 37 Provisions, Contingent Liabilities and Contingent Assets,Borrowing Costs,Cost purchase price + costs to bring asset to working condition. So if a loan is essential to obtain an asset and get it to a working condition, for example while it is being constructed, is this part of cost? The problems: (i) When the company credits cash because it pays interest charges what should be debited? The choices are expense IS and BS capitalisation as part of the assets BS value. (ii) The company may have loans that are for general purposes, not just to cover the cost of a specific asset. The cost of borrowing associated with a specific asset may be unclear.,Borrowing costs The Nature of Assets under Review,The IAS 23 talks about qualifying assets, which take a substantial time to prepare for their intended use or for sale. They include: Construction work-in- process Manufacturing plants Intangible assets Investment Properties They do not include: Financial assets Inventories produced over short time scales,Borrowing Costs Changes of Treatment,Textbook explains how IASB thinking has changed over time. 1980s free choice to expense, or if certain conditions were met capitalise 1990s E32 - benchmark treatment - Interest is recognised as an expense in the period in which cost is incurred. Capitalisation was the alternative treatment. E39 capitalisation required if certain conditions met, expensing required otherwise IAS 23 issued 1994 restored the choice but expensing was the benchmark treatment. 2000s - Convergence programme with the US IASB reverted to the E39 position and revised IAS 23. US and IASB capitalisation is required if certain conditions are met and otherwise expensing is required.,Borrowing Costs IAS 23,Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are to be capitalised. The relevant costs are those borrowing costs that would have been avoided if the expenditure on the qualifying asset had not occurred.,Directly Attributable Borrowing Cost,Borrowing may be specifically for one individual qualifying asset cost is clear. Borrowing for general purposes across the company then the cost must be estimated for the qualifying asset. Take a weighted average of the companys borrowing costs for the time that the asset counts as a qualifying asset.,Subsequent expenditure,Normally expensed Capitalised if excess future economic benefits will flow Extending useful life Upgrade to improve quality Adopting new production processes to significantly reduce costs Eg. Supermarket renovates a major store. Management budgets show a 15% increase in sales as a consequence of more / better display space. Since there is some reliability about estimates both the renovation and any specifically allocated interest could be capitalised,Depreciation,Definitions Calculations Impact on IS,Depreciation,Systematic allocation funds already expended matching concept Depreciable amount (cost residual value) Useful Economic Life,Useful economic life,Period of time in use Number of production units expected from an asset that is, a quantity rather than time base Most assets have finite lives and are depreciated Freehold land infinite life Investment properties an exception IAS 40.,How is useful economic life decided,Factors to consider include: Repair costs Availability of replacement parts Comparative cash flows of alternative assets Companies might manipulate the useful economic life to change the depreciation charge,Choice of depreciation method impacts on reported profit,Figure 15.2 Effect of different depreciation methods Slide from Elliott and Elliott,(2,000) (38%) Difference,Depreciation Sum of the units method,Figure 15.3 Sum of the units method,Depreciation,Depreciation should reflect the actual consumption of economic benefit Disclosure: measurement base of gross carrying value, depreciation method, and the useful life Reconciliation of the carrying value and depreciation at start and end of the year. Given as a note to the Balance Sheet. Check out a set of company financial statements,Revaluation,Revaluation Surplus Recording Revaluations,Impact of Inflation,If assets are valued at cost, inflation means that a gap develops between the NBV and the fair value IAS 16 permits revaluation fair value basically market value but if not available then use depreciated replacement cost Revaluation surplus account,Revaluation Example,Asset cost 12,000 1st Jan 2005 and is to be depreciated straight line over 6 years, no residual value. On 1st Jan 2007 company revalues no fair value but replacement cost is 21,000. Asset is sold on 1st January 2009 for 5000 Assume a 31st December year end,Step 1 Calculate Carrying Value before Revaluation,Carrying value at 31st December 2006 = 12,000 two years depreciation (12000 0)/6 = 2000pa Fixed Asset account dr 12,000 Depreciation account cr 4000 Carrying value or NBV = 8000,Step 2 Calculate Depreciated Replacement Cost,Replacement cost 21,000 but two years of life used (21000 0)/6 = 3500 pa Total depreciation of 7000 Carrying Value 21 7 = 14k Alternatively - 4 years of 6 left Carrying value = 21000x4/6 = 14000,Step 3 Insert into Accounting Records,At present FA has dr 12000 increase this to 21000 ie dr FA 9000 At present depn has 4000 increase to 7000 ie cr depn 3000 Difference 9000 3000 = 6000 Cr Revaluation Surplus NB This 6000 cannot be distributed to shareholders as the gain is not realised it is a gain on paper only,Step 4 Continue to Depreciate while owned,Two more years of life in company As before depreciation is (21000 0)/6 = 3500 pa Net book value on 31st December 2008 just prior to sale is 14000 at 1st Jan 2007 two more years of depreciation 7000 = 14000 7000 = carrying value of 7000,Step 5 Sell Asset and Remove from records,Cash 5000 and carrying value 7000 So loss of 2000 goes to income statement But there is also 6000 in the revaluation surplus which is now transferred to a realised reserve Implication is that a gain has been realised on sale and this can be distributed,Some Additional Ideas,Assets held for Sale Revaluation Decreases,Revaluation Decreases,A decrease is normally an expense in the IS However special case if the decrease reverses a previous revaluation increase Case of freehold land no depreciation Year 1 buy land 100,000, revalue year 3 to 150,000 and in year 5 to 90000 NB at end of 5 years the asset is worth 10,000 less than the original cost (HC),2 Steps- Years 3 and 5,Year 3 no gain in income statement Dr FA a/c 50,000