ICAEW – FAR QUIZ WITH 100% CORRECT
ANSWERS [ GRADED A+]
When does IAS 16 state PPE should be recognised? - ✔✔When it is probable that
future economic benefits will flow to the entity and the cost can be reliably
measured.
PPE should be measured at cost. What does IAS 16 state cost can include? - ✔✔-
purchase price including import duties and non-refundable purchase taxes after
deducting trade discount/rebates.
- directly attributable costs needed to bring asset to location and condition
necessary for it to be capable of operating as management intended.
©morren2024/2025.Year published 2024.
,Give 8 examples of what 'directly attributable costs' to PPE include. - ✔✔- costs of
wages needed for construction.
- site prep costs.
- initial delivery and handling costs.
- installation and assembly costs.
- costs of testing must deduct net proceeds from cost of any sellable items from
testing.
- professional fee.
- direct construction costs.
©morren2024/2025.Year published 2024.
,- PV of future dismantling and site restoration costs @ end of useful life.
Outline four costs that should be excluded from PPE cost and expenses to PL. -
✔✔- admin costs.
- general OVHs.
- abnormal costs INCLUDING labour strikes or planning errors (remove cost).
- costs incurred after asset is capable of normal operation.
How should incidental income relating to PPE be treated? - ✔✔It is not allowed to
be deducted from the cost of the asset in the SFP, it should be treated as other
income in the PL (so as not to reduce depreciation expense).
How should subsequent costs of acquiring PPE be treated? - ✔✔Subsequent costs
are expenses incurred after completion of the asset and can only be capitalised if
it ENHANCES the economic benefit provided by the asset.
©morren2024/2025.Year published 2024.
, Improvements = capitalise.
Repairs = expense (PL).
Define borrowing costs (PPE). - ✔✔Interest and other costs incurred in
connection with the borrowing of funds in order to construct an asset.
How should borrowing costs be treated in the financial statements? - ✔✔Directly
attributable borrowing costs MUST be capitalised as part of qualifying asset cost.
A qualifying asset takes a substantial period of time to get ready for use or
intended sale.
Borrowing specifically for asset funding = capitalise cost incurred MINUS income
from temp investment of surplus borrowings (i.e. only need half the borrowings
for first 6 months so invest other half).
©morren2024/2025.Year published 2024.
ANSWERS [ GRADED A+]
When does IAS 16 state PPE should be recognised? - ✔✔When it is probable that
future economic benefits will flow to the entity and the cost can be reliably
measured.
PPE should be measured at cost. What does IAS 16 state cost can include? - ✔✔-
purchase price including import duties and non-refundable purchase taxes after
deducting trade discount/rebates.
- directly attributable costs needed to bring asset to location and condition
necessary for it to be capable of operating as management intended.
©morren2024/2025.Year published 2024.
,Give 8 examples of what 'directly attributable costs' to PPE include. - ✔✔- costs of
wages needed for construction.
- site prep costs.
- initial delivery and handling costs.
- installation and assembly costs.
- costs of testing must deduct net proceeds from cost of any sellable items from
testing.
- professional fee.
- direct construction costs.
©morren2024/2025.Year published 2024.
,- PV of future dismantling and site restoration costs @ end of useful life.
Outline four costs that should be excluded from PPE cost and expenses to PL. -
✔✔- admin costs.
- general OVHs.
- abnormal costs INCLUDING labour strikes or planning errors (remove cost).
- costs incurred after asset is capable of normal operation.
How should incidental income relating to PPE be treated? - ✔✔It is not allowed to
be deducted from the cost of the asset in the SFP, it should be treated as other
income in the PL (so as not to reduce depreciation expense).
How should subsequent costs of acquiring PPE be treated? - ✔✔Subsequent costs
are expenses incurred after completion of the asset and can only be capitalised if
it ENHANCES the economic benefit provided by the asset.
©morren2024/2025.Year published 2024.
, Improvements = capitalise.
Repairs = expense (PL).
Define borrowing costs (PPE). - ✔✔Interest and other costs incurred in
connection with the borrowing of funds in order to construct an asset.
How should borrowing costs be treated in the financial statements? - ✔✔Directly
attributable borrowing costs MUST be capitalised as part of qualifying asset cost.
A qualifying asset takes a substantial period of time to get ready for use or
intended sale.
Borrowing specifically for asset funding = capitalise cost incurred MINUS income
from temp investment of surplus borrowings (i.e. only need half the borrowings
for first 6 months so invest other half).
©morren2024/2025.Year published 2024.
