International Accounting Standards: IAS 16, IAS 23, IAS 36, IAS 38, and PIC Q&A 2012-02

Comprehensive vocabulary flashcards covering the core principles, definitions, recognition rules, and measurement criteria across IAS 16 (Property, Plant and Equipment), IAS 23 (Borrowing Costs), IAS 36 (Impairment of Assets), IAS 38 (Intangible Assets), and Philippine Interpretations Committee Q&A No. 2012-02.

Carrying Amount (IAS 36)

The amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.

Cash-Generating Unit (CGU)

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Corporate Assets

Assets other than goodwill that contribute to the future cash flows of both the cash-generating unit under review and other cash-generating units, such as a corporate head office, EDP equipment, or a research centre.

Costs of Disposal

Incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.

Recoverable Amount

The higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use.

Value in Use

The present value of the future cash flows expected to be derived from an asset or cash-generating unit, discounted using a pre-tax discount rate reflecting market assessments of the time value of money and asset-specific risks.

Mandatory Annual Impairment Testing (IAS 36)

The requirement under paragraph $10$ to test for impairment annually—irrespective of any indicator—intangible assets with an indefinite useful life, intangible assets not yet available for use, and goodwill acquired in a business combination.

Impairment Loss Allocation Order (CGU)

The sequence under IAS 36 paragraph $104$ whereby an impairment loss for a CGU is allocated first to reduce any goodwill allocated to the unit, and then to the other assets of the unit pro rata based on the carrying amount of each asset.

Reversal of Impairment Loss on Goodwill

A prohibited accounting action under IAS 36 paragraph $124$, because any subsequent increase in recoverable amount is regarded as an increase in internally generated goodwill rather than a reversal of acquired goodwill impairment.

Expected Cash Flow Approach (IAS 36 Appendix A)

A present value technique that incorporates all expectations about possible future cash flows weighted by their probabilities, rather than using a single most likely cash flow and risk-adjusted discount rate.

Demolition of Acquired Old Building for Owner-Occupied PPE (PIC Q&A 2012-02 Scenario 1(a))

The consensus stating that when an entity acquires land and an old building intending to demolish the building immediately to build an owner-occupied structure, the allocated cost of the old building is not capitalized into the new building; instead, it is derecognized and charged to profit or loss.

Demolition of Acquired Old Building for Inventory Development (PIC Q&A 2012-02 Scenario 1(b))

The consensus permitting an entity to include any purchase cost allocated to an old building as part of the cost of the new building or development property held for sale as inventory under PAS $2$.

Demolition of Previously Owner-Occupied Building (PIC Q&A 2012-02 Scenario 2)

The requirement that when an entity decides to demolish a previously used owner-occupied building, its depreciation must be revised over its remaining life until demolition; any remaining carrying value at demolition is expensed in profit or loss and cannot be capitalized into the new building.

Accounting for Demolition Costs (PIC Q&A 2012-02)

The guidance establishing that costs to physically tear down an old building qualify as site preparation costs under PAS $16.17(b)$ and are preferably capitalized as part of the cost of the replacement building.

Intangible Asset (IAS 38)

An identifiable non-monetary asset without physical substance that is controlled by the entity as a result of past events and from which future economic benefits are expected to flow.

Identifiability Criteria (IAS 38)

The characteristic of an intangible asset that distinguishes it from goodwill, met if the asset is separable (capable of being separated and sold/transferred) or arises from contractual or other legal rights.

Research Phase (IAS 38)

Original and planned investigation undertaken to gain new scientific or technical knowledge, for which all associated expenditure must be recognized as an expense when incurred with no intangible asset recognized.

Development Phase Recognition Criteria (IAS 38)

The six criteria required by paragraph $57$ to recognize an intangible asset: technical feasibility, intention to complete, ability to use/sell, demonstration of future economic benefits, availability of resources, and ability to reliably measure development expenditures.

Internally Generated Brands and Mastheads (IAS 38)

Items such as internally generated brands, mastheads, publishing titles, and customer lists that IAS 38 explicitly prohibits from being capitalized as intangible assets because they cannot be distinguished from costs of developing the business as a whole.

Indefinite Useful Life (IAS 38)

A determination that there is no foreseeable limit to the period over which an intangible asset is expected to generate net cash inflows; such assets are not amortised but must be tested for impairment at least annually.

Rebuttable Presumption on Revenue-Based Amortisation (IAS 38)

The standard presumption under paragraph $98A$ that amortisation methods based on revenue generated by activities using an intangible asset are inappropriate, which can only be overcome if revenue is the predominant contractual limiting factor or is highly correlated with consumption.

Active Market Requirement for Revaluation (IAS 38)

The strict prerequisite for applying the revaluation model to intangible assets under IAS 38, precluding revaluation for unique assets such as patents, trademarks, and brands where active trading cannot exist.

Borrowing Costs (IAS 23)

Interest and other costs that an entity incurs in connection with the borrowing of funds, including interest expense calculated via the effective interest method, interest on lease liabilities (IFRS 16), and exchange differences regarded as adjustments to interest.

Qualifying Asset (IAS 23)

An asset that necessarily takes a substantial period of time to get ready for its intended use or sale, such as manufacturing plants, power generation facilities, certain inventories, and bearer plants.

Borrowing Costs on Specific Borrowings (IAS 23)

The actual borrowing costs incurred on specific borrowings during the period less any investment income earned on the temporary investment of those borrowed funds.

Capitalisation Rate on General Borrowings (IAS 23)

The weighted average of the borrowing costs applicable to all outstanding general borrowings during the period, excluding specific borrowings until substantially all preparatory activities for that specific qualifying asset are complete.

Commencement of Capitalisation Conditions (IAS 23)

The three cumulative criteria under paragraph $17$ that trigger the commencement date for borrowing cost capitalisation: (1) expenditure for the asset is incurred, (2) borrowing costs are incurred, and (3) activities necessary to prepare the asset for its intended use or sale are underway.

Suspension of Capitalisation (IAS 23)

The requirement to pause borrowing cost capitalisation during extended periods in which active development of a qualifying asset is interrupted, except during periods of substantial technical/administrative work or necessary temporary process delays.

Cessation of Capitalisation (IAS 23)

The requirement to stop capitalising borrowing costs when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete, including cessation on individual usable parts of segmented projects.

Property, Plant and Equipment (IAS 16)

Tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and are expected to be used during more than one period.

Bearer Plant (IAS 16)

A living plant that is used in the production or supply of agricultural produce, expected to bear produce for more than one period, and has a remote likelihood of being sold as agricultural produce except for incidental scrap sales.

Directly Attributable Costs (IAS 16)

Costs necessary to bring PPE to the location and condition intended by management, including employee benefits of acquisition/construction, site preparation, delivery, installation, professional fees, and testing costs.

Commercial Substance (IAS 16 / IAS 38)

The criterion determining whether an exchange of non-monetary assets is measured at fair value, satisfied if the cash flow configuration or entity-specific value of affected operations changes significantly relative to the fair value of exchanged assets.

Component Depreciation (IAS 16)

The requirement under paragraph $43$ to depreciate separately each part of an item of property, plant and equipment that has a cost that is significant in relation to the total cost of the item.

Revenue-Based Depreciation Prohibition (IAS 16)

The principle set out in paragraph $62A$ specifying that a depreciation method based on revenue generated by an activity involving the asset is inappropriate because revenue reflects factors other than economic consumption.

Proceeds before Intended Use (Amendments to IAS 16)

The accounting amendment prohibiting entities from deducting from the cost of PPE amounts received from selling items produced while bringing the asset to intended operation (such as test samples); proceeds and related costs must be recognised in profit or loss.