MFRS 116 Property, Plant and Equipment Flashcards

Comprehensive vocabulary flashcards covering MFRS 116 Property, Plant and Equipment, including recognition, measurement models, depreciation methods, and impairment.

Property, Plant and Equipment (PPE)

Tangible assets held for use in the production or supply of goods or services, or for administrative purposes, and expected to be used during more than one reporting period.

Recognition Criteria for PPE

An item shall be recognised as an asset if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.

Component Approach

A method where the total expenditure of a significant item of PPE is allocated to its component parts and accounted for separately, typically when components have different useful lives.

Initial Measurement of PPE

Upon recognition, an item of fixed asset should be measured at its cost, which generally includes its purchase price and any directly attributable costs.

Directly Attributable Costs

Costs necessary to bring an asset to the location and condition for it to be capable of operating as intended, such as delivery, installation, professional fees, and site preparation.

Self-constructed PPE

Assets built by an entity for its own use, where costs include materials, labour, and overheads, but exclude internal profits and abnormal amounts of wastage.

Decommissioning, Dismantling & Restoration Costs

Costs required to be included in the initial cost of fixed assets, representing the estimate of costs to dismantle the asset and restore the site at the end of its life.

Asset Exchange Transaction

Acquisition of an item in exchange for a non-monetary asset, measured at fair value unless the exchange lacks commercial substance or fair value is not determinable.

Capital Expenditure

Subsequent costs that result in betterments, such as major overhauls or upgrades that increase output capacity or extend the asset's useful life.

Revenue Expenditure

Subsequent costs for ordinary repairs and maintenance that maintain the asset's normal operating condition without increasing productivity or life.

Cost Model

An accounting policy where an item of PPE is carried at its cost less any accumulated depreciation and accumulated impairment losses.

Revaluation Model

An accounting policy where an item of PPE is carried at a revalued amount, being its fair value at the date of revaluation less subsequent accumulated depreciation and impairment losses.

Depreciable Amount

The cost of an asset, or other amount substituted for cost, less its residual value: $\text{Cost} - \text{Estimated residual value}$.

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life.

Residual Value

The net amount an entity expects to obtain from disposal of an asset at the end of its useful life after deducting expected costs of disposal.

Straight-Line Method

A depreciation method that allocates the depreciable amount of an asset evenly over its useful life: $\frac{\text{Cost} - \text{Salvage Value}}{\text{Useful life}}$.

Double-Declining-Balance Method

An accelerated depreciation method calculated as: $2 \times \text{Straight-line rate} \times \text{Beginning period carrying value}$.

Sum-of-Digit Method

A depreciation method where the annual charge is computed by: $(\text{Cost} - \text{Salvage value}) \times \text{Weighted factor} / \text{Sum-of-the-digits}$, where sum equals $\frac{n(n+1)}{2}$.

Recoverable Amount

Defined under MFRS 136 as the higher of an asset's fair value less costs to sell and its value in use.

Value in Use

The present value of estimated future cash flows expected to be derived from the continued use of an asset and from its disposal at the end of its useful life.

Impairment Loss

The amount by which the carrying amount of an asset exceeds its recoverable amount.

Derecognition

The removal of an asset from the statement of financial position when it is disposed of or when no future economic benefits are expected from its use.

Revaluation Surplus (Initial)

An increase in an asset's carrying amount recognized as other comprehensive income and credited to a revaluation reserve.

Revaluation Deficit (Initial)

A decrease in an asset's carrying amount that is charged as an expense in the statement of profit or loss.