ACCA

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01 technical accounting for property, plant and equipment RELEVANT TO ACCA QUALIFICATION PAPER F7 The accounting for IAS 16, Property, Plant and Equipment is a particularly important area of the Paper F7 syllabus. You can almost guarantee that in every exam you will be required to account for property, plant and equipment at least once. This article is designed to outline the key areas of IAS 16, Property, Plant and Equipment that you may be required to attempt in the F7 exam. IAS 16, Property, Plant and Equipment overview There are essentially four key areas when accounting for property, plant and equipment that you must ensure that you are familiar with: ¤ initial recognition ¤ depreciation ¤ revaluation ¤…show more content…
This will enable Yucca to increase production without the need to purchase a new machine. Should the additional expenditure be capitalised or expensed? (See page 5 for the solution to Example 3.) 02 student accountant issue 19/2010 Studying Paper F7? Performance objectives 10 and 11 are relevant to this exam A gain on revaluation is always recognised in equity, under a revaluation reserve (unless the gain reverse’s revaluation losses on the same asset that were previously recognised in the income statement – in this instance the gain is to be shown in the income statement). The revaluation gain is known as an unrealised gain which later becomes realised when the asset is disposed of (derecognised). Depreciation Depreciation is defined in IAS 16 as being the systematic allocation of the depreciable amount of an asset over its useful economic life. In other words, depreciation applies the accruals concept to the capitalised cost of a non-current asset and matches this cost to the period that it relates to. Depreciation methods There are many methods of depreciating a non-current asset with the most common being: ¤ Straight line ¤ % on cost or ¤ Cost – residual value Useful economic life ¤ Reducing balance ¤ % on carrying value Example 4 An item of plant was purchased on 1 April 2008 for $200,000 and is being

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