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IAS 16 permits two accounting models for measurement of the asset in periods subsequent to its recognition, namely the cost model and the revaluation model. [7] Under the cost model, the carrying amount of the asset is measured at cost less accumulated depreciation and eventual impairment (similar to the inventory's Lower of cost or market ...
An impairment cost must be included under expenses when the book value of an asset exceeds the recoverable amount. Fixed assets , commonly known as PPE (Property, Plant & Equipment), refers to long-lived assets such as buildings, land, machinery, and equipment; these assets are the most likely to experience impairment, which may be caused by ...
Revaluation Reserve is treated as a Capital Reserve. The increase in depreciation arising out of revaluation of fixed assets is debited to revaluation reserve and the normal depreciation to Profit and Loss account. Selection of the most suitable method of revaluation is extremely important. The most used method is the appraisal method.
Under IFRS, IAS 16 allows entities to choose between a cost (IAS 16.30) and revaluation (IAS 16.31 to 42) model. If an entity applies the revaluation model, it will measure and report its property plant and equipment at fair value on its balance sheet. It will report the changes in fair value in comprehensive income and accumulate them as a ...
Purchase price allocation (PPA) is an application of goodwill accounting whereby one company (the acquirer), when purchasing a second company (the target), allocates the purchase price into various assets and liabilities acquired from the transaction.
Net book value of an asset is the difference between the historical cost of that asset and its associated depreciation. Under most financial accounting standards (Standard Accounting Statement (SAS) 3 and IAS 16), the value of fixed assets are recorded and reported at net book value.
The historical cost of an asset at the time it is acquired or created is the value of the costs incurred in acquiring or creating the asset, comprising the consideration paid to acquire or create the asset plus transaction costs. [1]
Companies are required to restate their historical cost financial reports in terms of the period end hyperinflation rate in order to make these financial reports more meaningful. [12] [13] [14] The restatement of historical cost financial statements in terms of IAS 29 does not signify the abolishment of the historical cost model.