ACCA F3 Chapter 9: Non-Current Assets

Flashcards for ACCA F3 Chapter 9 on Non-Current Assets, covering definitions, expenditure types, depreciation, revaluation, and disposal.

Tangible Non-current Asset

Assets bought by a business for continuing use that have a physical form.

Capital Expenditure

Expenditure that results in the acquisition of non-current assets or improvements to existing non-current assets; capitalized and depreciated over time.

Revenue Expenditure

Expenditure incurred for the purpose of trade or to maintain non-current assets; expensed in the statement of profit or loss.

Capital Income

Proceeds from the sale of non-trading assets (i.e., non-current assets).

Revenue Income

Income derived from the sale of trading assets, provision of services, or interest/dividends from investments.

IAS 16 Property, Plant, and Equipment

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

Cost (IAS 16)

Amount of cash or cash equivalents paid or the fair value given to acquire an asset at the time of acquisition or construction.

Fair Value

The price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Carrying Amount

The amount at which an asset is recognized after deducting accumulated depreciation and impairment losses.

Recognition (IAS 16)

Incorporation of an asset in the business's accounts, based on the probability of future economic benefits and reliable cost measurement.

Components of Cost (IAS 16)

Purchase price (excluding discounts and sales tax), import duties, initial dismantling/removal costs, and directly attributable costs to bring the asset to working condition.

Subsequent Expenditure

Added to the carrying amount of an asset only when it is probable that future economic benefits will exceed the originally assessed standard of performance; otherwise, expensed.

Depreciation

Allocation of the cost of a non-current asset (less residual value) over its useful life; charged against profit and deducted from the asset's value in the statement of financial position.

Depreciable Amount

The historical cost (or substituted amount) less the estimated residual value.

Useful Life

The period over which a depreciable asset is expected to be used or the number of production units expected to be obtained from the asset.

Straight Line Method

Depreciates the total depreciable amount in equal installments over the asset's useful life.

Reducing Balance Method

Calculates annual depreciation as a fixed percentage of the carrying amount of the asset at the end of the previous period.

Revaluation (IAS 16)

Entities can revalue non-current assets to fair value. When an asset is revalued, depreciation is charged on the revalued amount.

Excess Depreciation

The difference between the new depreciation charge based on the revalued amount and the old depreciation charge based on the original cost.

Profit or Loss on Disposal

Difference between the net sale price of an asset and its carrying amount at the time of disposal.

Asset Register

Internal record of all non-current assets, used as an internal check on the accuracy of the nominal ledger.