How cost of tangible fixed asset is determined?
Fixed assets or non-current assets can either be tangible or intangible and separate standards provide guidance on both. For most of the tangible fixed assets IAS 16 is considered whereas for most of the intangible fixed assets IAS 38 contains the provisions. For tangible non-current asset as per IAS 16 Property Plant and Equipment cost […]
Is Warranty cost capitalized or included in cost of the asset?
Warranty in simple words is a promise by the manufacturer to make good of your loss under certain conditions. This helps win customers’ confidence and is one of the major consideration in buyer’s purchase process. Warranty offers comes in different forms such as simple warrant, extended warranty, replacement warranty, repair warranty, life time warranty etc. […]
How to record the disposal of revalued non-current asset?
Revalued non-current asset is the one that has undergone revaluation and now that asset is now measured on revaluation basis instead of historical cost basis. To learn more about revaluation model consult our IAS 16 - Property Plant and Equipment resources page. The accounting treatment of disposal of asset that is carried on revaluation basis […]
Is change in depreciation method a change in accounting policy or accounting estimate?
Depreciation method helps accountants in aligning the recognition of cost with the benefits rendered by asset as per the requirement of IAS 16 that requires rate of depreciation rate to match the rate at which benefits are extracted from the asset. Thus depreciation method in itself is an estimation of consumption of utility in the […]
How to account for change in residual value of fixed asset?
International Accounting Standard (IAS) 16 recognizes that residual value of asset may increase or decrease as a result of revaluations or future assessments of non-current asset. IAS 16 recognizes such change as a change in accounting estimate i.e. adjustment will be prospective in nature. There is no need to adjust for previously recorded depreciation charge […]
What is Depreciated replacement cost?
Depreciated replacement cost is an optimised form of replacement cost method to make the estimate more realistic by adding the aspect of depreciation to a simple replacement cost concept for valuation purposes. Replacement cost is simply defined as the cost that entity has to bear in order to replace the asset with such resource that […]
How fixed assets are revalued if fair value cannot be determined using market value?
IAS 16 Property, Plant and Equipment (IAS 16) recognizes the fact that fair value of every asset may not be determined using market value basis. Although it is recommended and hardly the case where market information does not help but still exceptions exist. IAS 16 recognises such assets specialized assets for which fair value cannot […]
What is Income approach to fixed asset revaluation?
After initial recognition at cost if the carrying value of an item (of property, plant and equipment) is significantly different from the value measured on fair value basis then revaluation of asset is required. The reason is if asset is still carried at old value financial statements might give distorted view of assets. Assets are […]
Can we depreciate asset below residual value?
Main purpose of depreciation is to reduce the value of asset over its useful life in such a systematic way that such reduction corresponds with the rate at which benefits are rendered from the assets. To learn more about what is depreciation? You can visit this page. International Accounting Standard (ISA) 16 Property plant and […]
Is Sales tax included in the cost of the asset?
General rule is that everything paid specifically for the asset will form part of the cost of the asset purchased by the entity i.e. any cost incurred specifically towards the asset until it is brought in to an intended use, everything will form part of cost of the asset. However, things are not that simple […]
