IAS Notes Cont.

IAS 16 - PROPERTY, PLANT AND EQUIPMENTThis is used to set out the accounting treatment for property, plant and equipment (PPE). There are non-current tangible assets such as land and buildings, machinery, office equipment, shop fittings and vehicles.The key features covered by the standard are the recognition of the assets, the measurement of assets and the depreciation charges to be recognised in relation to them.

DefinitionsProperty, Plant and Equipment - are tangible assets held for use in the production or supply of goods and services, which are expected to be used for more than one accounting period.Depreciation - is the systematic allocation of the depeciable amount of an asset over its useful life.Depreciable amount - is the cost or valuation of the asset, less any residual value.Useful life - is the length of time, or the number of units of production, for which an asset is expected to be used.Residual value - is the net amount the business expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal.Fair value - is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transactionCarrying amount - is the amount at which an asset is recognised in the balance sheet, after deducting any accumulated depreciation or impairment losses

IAS 18 - REVENUEthis is to set out the accounting treatment to ensure that revenue is correctly shown in the income statement.Revenue is the inflow of economic benefits arising from the ordinary activities of a business. Examples of revenue include sales of goods and services, and the recepts of intrest, royalties and dividends.Based on the realisation concept, financial transactions are recorded in the financial statements when legal title passes between buyer and seller - which may well not be at the same time as payment is made.

IAS 18 states that revenue is to be recorded at the fair value of the monies received or receivable.The standard sets out the rules for the recognition of types of revenue: Sale of goods and services Interest, royalties and dividends

IAS 36 - IMPAIRMENT OF ASSETSTo set out the accounting treatment to ensure that assets are shown in the balance sheet at no more than their value, or recoverable value. If the recoverable amount of an asset is less that its carrying amount, then the carrying value is to be reduced. This is an impairment loss, which is recognised as an expense in the income statement.

DefinitionsCarrying amount - is the amount at which an asset is recognised after deducting any accumalated depreciation/ amortisaton and accumulated impairment losses (ie the amount of an asset's net book value).Depreciation (Amortisation) - is the systematic allocation of the depreciable amount of an asset over its useful life.Depreciable amount - Is the cost of an asset less its residual valueImpairment loss - is the amount by which the carrying amount of an asset exceeds its recoverable amountFair value, less cost to sell - is the amount at which an asset could be sold for, less any selling costs.Recoverable amount - of an asset is the higher of its: fair value, less any costs that would be incurred were it to be sold its value in use Useful life - is either the period of time over which an asset is expected to be used; or the number of prodution units expected to be obtained from the asset. Value in use - is the present value of the future cash flows from an asset's continued use, including cash from its final sale

IIAS 36 applies to most non-current assets, such as land and buildings, plants and machinery, vehicles, goodwill. assets neeed to be reviewed at each balance sheet date to judge whether there is any evidence of impairment.Impairment occurs when the recoverable amount is less than the asset's carrying amount. If there is an impairment loss, the asset is shgown in the balance sheet at its recovable amount and the impairment loss is shown in the income statement as a loss.

Indicators of ImpairmentIAS 36 gives a number of external and internal indicators of impairment, of which the following are some examples:External sources a significant fall in the asset's market value adverse effects on the business caused by technology, markets, the economy, laws increases in intrest rates  Internal Sources obsolescence or physical damage to the asset adverse effects on the asset of a sidnificat reorganisation within the business

IAS 38 - INTANGIBLE ASSETSSet out the accounting treatment of expenditure on intangible assets.This doesn't cover the intangible assets of goodwill - this is dealt with under a different international accounting standard, which is not required.Intangible Asset - an identififiable non-monetary asset without physical substance

Intangible assets come from 2 main sources, Purchased and internally generated

Intangible assets are depreciated usually using the straight-line method.

IAS 16

IAS 18

IAS 36

IAS 38