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Notes For L2

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least contract?

Yes
lessee? No
Notes for L2 lessor? Yes
lease asset? Yes
IFRS 16 Leasing
Identifying a lease – Identified assets, period of time, rights to obtain
substantially all of the economic benefits, rights to direct the use of asset
(control)
recognition
Exemption – short term lease, lease for low value assets

Measurement by the lessee – initial measurement and subsequent measurement

Initial measurement of right of use asset and lease liability


Subsequent measurement of right of use asset and lease liability
Instalments in arrear or in advance

Disclosure – right of use asset and lease liability

Sale and leaseback transactions – transfer is a sale, transfer is not a sale


Sale & leaseback transaction is to be
If yes recognised as sale transaction + lease
Seller-lessee to determine
whether the transfer of asset is transaction.
a sale (according to IFRS15)
If no Sale & leaseback transaction is to be
recognised as a single financing transaction.

lease term
-non-cancellable period of a lease
-renewal/purchase option period LL+ Deposit - incentive + PV dismantling cost +
-option to terminate dispect cost

lease incentive (received) liabilty

Right of use asset = LL


not same, Dr ROUA Cr LL
depreciation-> lease term or useful life,
choose the lower

Prepared by : cygan 1
IAS 20 Government Grant

Prepared by : cygan 2
record in book that u hv grant
A government grant should only be recognised when there is reasonable
grant flw exp
assurance that: Expense
– the entity will comply with the conditions of the grant; and 1-50%
2-30%
– the entity will receive the grant. 3-20%
flw the percentage
Grants related to income should be recognised over the period in which the
associated costs are incurred.
Dr Bank
Grants related to assets may be presented by either: Cr Expenses/ income
– setting up the grant as deferred income; or
– offsetting the grant against the carrying amount of the relevant asset
see how many years
> 1yrs, hv to open DI acc
DI method, every yr take out from pnl
charge depreciation

income

Dr Exp
Cr Bank
a must!!!

When grant When grant


received received When grant
Dr. Cash Dr. Cash When grant
received
Cr. DI Cr. PPE received
Dr. Cash
Adj at YE Dr. Cash
Cr. PL PnL
Adj at YE Dr. Depn Cr. DI
(as other
Dr. Depn Cr. Acc Depn
deferred income
income or Adj at YE
Cr. Acc Depn (at lower depn)
deducted from Dr. DI
Dr. DI related Cr. PL
Cr. PL expenses) (as other income
Repayment of a grant should be treated as a change in accounting estimate.
***grant flw depreciation Dr PL or deducted from
Cr Liability related expenses)
Prepared by : cygan 3
Repayable grants

Revision of accounting IRS 8--> prospective


estimate

Grant related to Grant related to asset


income

Write off If against asset: If deferred


Charge the income: write off
unamortised excess as Increase the
deferred unamortised
expense carrying amount deferred income
income

Dr. Unamortised
Dr. Asset deferred
Dr. Unamortised Dr. Loss-P&L income
deferred Cr. Accum. depre
income Dr./Cr. G/L - P&L
Cr. Liability
Dr./Cr. G/L – P&L Cr. Liability
Cr. Liability
offset against asset
pay back the grant

Prepared by : cygan 4
IAS 16 Property Plant Equipment
Definition:

Prepared by : cygan 5
Being used in operations,
Has a long useful life
Possesses physical substance Dr PPE
Cr Bank/AP
Recognition: >50%
It is probable that future economic benefits associated with the asset will
flow to the entity; and
the cost of the asset to the entity can be measured reliably.
Subsequent expenditure:
capitalise if improve capacity Dr PPE
expense if maintain capacity Dr Expenses

Initial measurement:
(i) Purchased price
(ii) Direct attributable costs
(iii) Initial estimate of cost of dismantling and removing and restoring
(iv) Borrowing costs (if any)

FV

after 1 yr, 19 10mill


Dr Finance cost
Cr Provision

Cost excluded → cost of opening new facility, introducing new products, training
cost, conducting business in new location, admin and general overhead, internal
profit, abnormal cost, wasted resources, industrial disputes
Subsequent measurement: if u buy a machine from thailand
Cost model ship out
cost- Acc Dep--> impairment dismantling cost
testing product can be capitalised

once u can use it to earn $, hv to start depreciation and record PL


Prepared by : cygan 6
Revaluation model
Revaluation → to calculate revaluation surplus or deficit (CA vs FV)
Revaluation gain → recognised in OCI as revaluation surplus (revaluation
reserve account) exception 1st time charge to PL 12
2nd time offset PL 10 ->extra RR 2
Revaluation loss → recognised as expense in PL unless relate to an earlier
revaluation surplus
After revaluation, depreciation is based on revalued amount
Annual reserves transfer is allowed (from RR to RE) by excess of actual
depreciation over historical cost depreciation.
Depn = $1,000/10 yrs = $100 Depn = $1,200/9 yrs = $133

1/1/2019 31/12/2019 31/12/2020


• Co. A bought • Revaluation exercise • Revaluation exercise
machine $1,000 surplus • CA = $1,000 - $100 • CA = $1,200 - $133
• Estimated useful RR = $900 = $1,067
life 10 years 300 • FV = $1,200 • FV = $850
• Depn = $100 • Revaluation surplus • Revaluation deficit of
• Journal: of $300 $217
Dr. Machine $1,000 • Journal: • Journal:
Cr. Bank $1,000 Dr. Acc Depn $100 Dr. Acc Depn $133
Dr. Depn $100 Dr. Machine $200 Dr. RR $217
Cr. Acc Depn $100 FV cost Cr. RR $300 Cr. Machine $350
1200 1000
Dr. Depn $133 1200/9yrs Dr. Depn $106
200 Cr. Acc Depn $133 Cr. Acc Depn $106 850/8yrs
Dr. RR *$33 Dr. RR $6
optional
Cr. RE $33 Cr. RE $6
RR 1. make acc dep zero
use RR to offset the deficit
surplus 300, deficit 217, balancing
either way *133–100 = 33 OR 300/9 yrs = 33 building 25yrs
**106-100 = 6 OR (300-33-217)/8 yrs = 6
lease aircon system
10yrs 3yrs
Depreciation → allocating depreciable amount over NCA useful life
Each significant part of PPE must be depreciated separately
Residual values and useful lives must review annually

Depreciation methods:

Prepared by : cygan 7
straight line = (cost – residual value)/useful life
reducing balance = O/CA x depreciation rate
unit output = [(cost – residual value) / estimated lifetime output] x
units of output

Disposal of asset → to calculate dispose at gain or loss (CA vs Proceed)

Disposal of revalued asset → to close revaluation of disposal asset account to


retained earning account
cost
asset acc dep
Disclosure RR

Cost

Prepared by : cygan 8
Prepared by : cygan 9

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