|
Land
&
bldgs
Plant &
equip't
Motor
vehicles
Fixtures Total
Cost or valuation:
$000
$000
$000
$000
$000
Balance b/fwd
X
X
X
X
X
Additions X
X
X
X
X
Revaluation in year
X
X
X
X
X
Disposals (X)
(X)
(X)
(X)
(X)
–––– –––– –––– –––– ––––
Balance c/fd
X
X
X
X
X
–––– –––– –––– –––– ––––
Accumulated depreciation:
Balance b/fwd
X
X
X
X
X
Charge for the year
X
X
X
X
X
Revaluation in year
(X)
(X)
(X)
(X)
(X)
Disposals (X)
(X)
(X)
(X)
(X)
–––– –––– –––– –––– ––––
Balance c/fwd
X
X
X
X
X
–––– –––– –––– –––– ––––
Carrying amount c/fwd
X
X
X
X
X
–––– –––– –––– –––– ––––
Carrying amount b/fwd
X
X
X
X
X
–––– –––– –––– –––– ––––
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Chapter summary
Non-current assets: disposal and revaluation
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Test your understanding answers
Test your understanding 1
1
Dr Disposals $3,000
Cr Fixtures and fittings cost $3,000
2
Dr Accumulated depreciation $1,050
Cr Disposals $1,050
Depreciation working:
X2 10% × $3,000 × 11/12 = $275
X3 10% × $3,000 = $300
X4 10% × $3,000 = $300
X5 10% × $3,000 × 7/12 = $175
Total: $1,050
3
Dr Cash $2,000
Cr Disposals $2,000
Disposals
$
$
31.7.X5 fixtures and
fittings cost
3,000 Accumulated
depreciation
1,050
Profit on disposal (ß)
50 Cash proceeds
2,000
––––––
––––––
3,050
3,050
––––––
––––––
The charge to the statement of profit or loss for the year ended
31 December 20X5 is:
Depreciation charge for the year
$175
(Profit)/loss on disposal
$(50)
Note:
As depreciation is charged monthly, it is necessary to charge an
amount to the statement of profit or loss for the period 1 January 20X5 to
the disposal date 31 July 20X5.
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Test your understanding 2
Sewing machine
$
$
Balance b/f
2,500 Disposal
2,500
New asset PEA
750
Cash 4,850
Balance
c/f
5,600
––––––
––––––
8,100
8,100
––––––
––––––
Balance b/f
5,600
Accumulated depreciation (sewing machine)
$
$
Disposal 1,500
Balance
b/f
1,500
Balance c/f
1,120 Depreciation charge X5
1,120
––––––
––––––
2,620
2,620
––––––
––––––
Balance
b/f
1,120
Non-current assets: disposal and revaluation
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Depreciation b/f working:
$2,500 × 20% × 3 years = $1,500
Disposals
$
$
Sewing machine cost
2,500 Sewing machine
accumulated
depreciation
1,500
PEA
750
Loss on disposal (ß)
250
––––––
––––––
2,500
2,500
––––––
––––––
Depreciation charge
$
$
Sewing machine
Accumulated
depreciation
1,120 Profit or loss
1,120
––––––
––––––
Depreciation charge working:
$5,600 × 20% = $1,120
Test your understanding 3
The correct answer is C
Non-current asset – factory
$
$
Balance b/f
450,000
Revaluation 350,000
Balance
c/f 800,000
––––––
––––––
800,000
800,000
––––––
––––––
Balance b/f
800,000
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Accumulated depreciation (factory)
$
$
Revaluation 54,000
Balance
b/f 54,000
(2% × $450,000 ×
6 years)
––––––
––––––
54,000
54,000
––––––
––––––
Revaluation surplus
$
$
Factory
asset
350,000
Balance c/f
404,000 Accumulated
depreciation
54,000
––––––
––––––
404,000
404,000
––––––
––––––
Balance
b/f
404,000
Test your understanding 4
Land (valuation)
$
$
Original cost
260,000
Revaluation surplus
340,000 Balance c/f
600,000
––––––
––––––
600,000
600,000
––––––
––––––
Bal b/f
600,000 Disposals
600,000
––––––
––––––
Revaluation surplus
$
$
Retained earnings
340,000 Land
340,000
––––––
––––––
Non-current assets: disposal and revaluation
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Cash
$
$
Disposals 695,000
Disposal
$
$
Land 600,000
Cash 695,000
Gain on disposal
95,000
Note that the gain on disposal is included in the statement of profit or loss
in arriving at the profit for the year.
Retained earnings
$
$
Revaluation
surplus
340,000
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Intangible assets
Chapter learning objectives
Upon completion of this chapter you will be able to:
•
recognise the difference between tangible and intangible
non-current assets
•
define and explain the treatment of research costs and
development costs in accordance with IAS 38
•
calculate the amounts to be capitalised or expensed with
regard to research and development
•
explain the purpose of, calculate and account for
amortisation of intangible assets.
Chapter
9
PER
One of the PER performance objectives (PO6) is
to record and process transactions and events.
Working through this chapter should help you
understand how to demonstrate that objective.
Intangible assets
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1 Overview
Introduction
This chapter deals with the definition of intangible assets, before going on
to consider how they are recognised and measured in the financial
statements in accordance with IAS 38 Intangible assets.
Much of the content of this chapter is new. However, it is an important
foundation for your future ACCA studies, in particular for Financial
Reporting and Strategic Business Reporting.
2
Intangible assets (IAS 38)
Non-current assets are assets used within the business on an ongoing basis in
order to generate revenue.
IAS 38 Intangible Assets defines an intangible asset as
'an identifiable non-
monetary asset without physical substance'
(IAS 38, para 8). In particular,
the key characteristics of an intangible non-current asset are as follows:
•
it is a resource controlled by the entity as a result of past events from
which the entity expects to derive future economic benefits,
•
it lacks physical substance, and
•
it is identifiable and separately distinguishable from goodwill.
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