Ias 16 - Tangible Assets

IAS 16 – TANGIBLE ASSETS
 EXCHANGE TRANSACTIONS (new should be measured at FV of old which will become new’s cost)
- If the new asset is measured at FV, the FV of the asset given up is used to measure the cost of the asset received unless the FV
of the asset received is more clearly evident.
- If the new asset is not measured at FV, its cost is measured at the CA of the asset given in exchange for it.
- FV of old is preferred to use for calculating cost of asset acquired
No commercial substance if
- entity’s future cash flows are not expected to change as a result of this exchange.
- FV or neither asset is known
I II III IV
Cash received / (paid) 1.1 (2.1) - -
Asset given up
Orig. Cost 10.3 12.4 14.5 14.5
BV 6.4 7.3 3.4 3.4
Est. FV 8.5 6.6 4.6 4.6
Asset Received
Est. FV 7.1 9 4.1 N/A
BOTH known New (8.5-1.1) 7.4 New (6.6+2.1) 8.9 New (4.6+0) 4.6 New (4.6+0) 4.6
Bank 1.1 Loss 0.5 Old 3.4 Old 3.4
Old FV +- CASH Old 6.4 Old 7.3 Gain (bf) 1.2 Gain (bf) 1.2
Gain (bf) 2.1 Bank 2.1
NEW unknown New (8.5-1.1) 7.4 New (6.6+2.1) 8.9 New (4.6+0) 4.6 New (4.6+0) 4.6
OLD Known Bank 1.1 Loss 0.5 Old 3.4 Old 3.4
Old 6.4 Old 7.3 Gain (bf) 1.2 Gain (bf) 1.2
OLD FV+-CASH+ Gain (bf) 2.1 Bank 2.1
OLD unknown New 7.1 New 9 New 4.1 New 3.4

New Known Loss 0.4 Loss 1.5 Old 3.4 Old 3.4
Bank 1.1 Bank 1.1 Gain 0.7
NEW FV Old 6.4 Old 6.4
BOTH unknown New (6.4-1.1) 5.3 New (7.3+2.1) 9.4 New (3.4+0) 3.4 New (3.4+0) 4.6
No G/L arises Bank 1.1 Old 7.3 Old 3.4 Old 3.4
OLD CA+-CASH Old 6.4 Bank 2.1
CONDITION FOR REVALUATION

1. Reliable measurement of FV: This may or may not be market-based valuation.
2. Sufficient regularity: Frequency depends upon the changes in FV. i.e., when FV differs materially (not insignificant)
from its CA.
3. Class-wise application
CHANGE IN ESTIMATES:
- Depreciate over new estimated useful life and new residual value at the reporting date.
- New UL of the asset is also used to amortize the Impairment loss and Revaluation Surplus for calculating balances.
. (CA at rev date – New RV) .

New Est. UL OR Remaining UL
(CA @ rev date – New RV) / (Total hours life – hours used before change) * (hours used this year)
New Est. UL OR Remaining UL .
EXAMPLE 40
PLANT EQUIPMENT
Date of acquisition 1/1/15 1/7/15
Cost 500 360
RV 60 0
UL 10 12
Revaluation on 31 December 2016 FV 526 FV 280
RV 78 0
UL no change UL 15
Revaluation on 31 December 2018 FV 310 FV 275
RV 64 0
UL no change UL 10
Plant RS P/L Equipment P/L RS

01/01/2015 Pur 500 360
Dep -44 -15
Closing 456 345
01/01/2016 Opening 456 345

Dep -42 -23
Closing 414 322
FV Gain 112 112 FV Loss -42 -42
FV 526 112 280 -42
01/01/2017 Opening 526 112 280 -42

Dep -56 -14 -20 3
Closing 470 98 260 -39
01/01/2018 Opening 470 98 260 -39

Dep -58 -14 -26 3.9
Balance 412 84 234 -35.1
-102 -84 18 41 -35.1 5.9
FV 310 275
P/ 18 Asset 41
RS 84 P/L 35.1
Asset 102 RS 5.9
DISCLOSURES
GENERAL
a) Measurement bases used (cost or revaluation model)
b) Depreciation methods used
c) Useful lives or Depreciation rates used
d) Gross CA and the accumulated depreciation at the beginning and at the end of the period
e) Reconciliation between the opening and closing values for gross CA and accumulated depreciation, showing:
- additions during the year
- disposals during the year
- depreciation charge for the year
- increase or decrease in asset resulting from revaluation and impairment losses
FOR REVALUED ASSETS

a) Effective date of the revaluation;
b) Whether an independent valuer was involved;
c) For each revalued class of PPE, the CA that would have been recognized had the assets been carried under the cost
model; and
d) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance
to shareholders.
ADDITIONAL DISCLOSURE ENCOURAGED

a) CA of temporarily idle PPE;
b) GCA of any fully depreciated PPE still in use;
c) CA of PPE retired from active use and held for disposal; and
d) When the cost model is used, the FV of PPE if materially different from the CA

Ias 16 - Tangible Assets

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IAS 16 – TANGIBLE ASSETS

OLD unknown New 7.1 New 9 New 4.1 New 3.4

CONDITION FOR REVALUATION

. (CA at rev date – New RV) .

Plant RS P/L Equipment P/L RS

01/01/2016 Opening 456 345

01/01/2017 Opening 526 112 280 -42

01/01/2018 Opening 470 98 260 -39

FOR REVALUED ASSETS

ADDITIONAL DISCLOSURE ENCOURAGED

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