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    FAR1 - PPE - Subsequent Measurement

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    Erika Mae Legaspi
    This document discusses various depreciation methods and accounting policies for property, plant, and equipment (PPE). It outlines equal charges methods like straight-line and activity methods like working hours. It also describes declining balance methods and other methods like inventory and retirement. The document notes that changes in estimates like useful life or depreciation method are accounted for prospectively. It discusses the cost and revaluation models for subsequent PPE measurement and calculating revaluation surplus.

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    FAR1 - PPE - Subsequent Measurement

    Uploaded by

    Erika Mae Legaspi
    72 views11 pages
    This document discusses various depreciation methods and accounting policies for property, plant, and equipment (PPE). It outlines equal charges methods like straight-line and activity methods like working hours. It also describes declining balance methods and other methods like inventory and retirement. The document notes that changes in estimates like useful life or depreciation method are accounted for prospectively. It discusses the cost and revaluation models for subsequent PPE measurement and calculating revaluation surplus.

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    FAR1_PPE_Subsequent Measurement

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    This document discusses various depreciation methods and accounting policies for property, plant, and equipment (PPE). It outlines equal charges methods like straight-line and activity methods like working hours. It also describes declining balance methods and other methods like inventory and retirement. The document notes that changes in estimates like useful life or depreciation method are accounted for prospectively. It discusses the cost and revaluation models for subsequent PPE measurement and calculating revaluation surplus.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    72 views11 pages

    FAR1 - PPE - Subsequent Measurement

    Uploaded by

    Erika Mae Legaspi
    This document discusses various depreciation methods and accounting policies for property, plant, and equipment (PPE). It outlines equal charges methods like straight-line and activity methods like working hours. It also describes declining balance methods and other methods like inventory and retirement. The document notes that changes in estimates like useful life or depreciation method are accounted for prospectively. It discusses the cost and revaluation models for subsequent PPE measurement and calculating revaluation surplus.

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    © All Rights Reserved
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    Property, Plant &

    Equipment
    DEPRECIATION METHODS DEPRECIATION METHODS
    EQUAL CHARGES ACTIVITY METHODS
    Methods Computation of Depreciation Methods Computation of Depreciation
    Straight Depreciable Cost Working Hours Depreciable Cost
    Line Estimated Useful Life (EUL) Estimated Service Hours

    Composite Output Depreciable Cost


    Dissimilar production Estimated Capacity (in units)
    Group Method
    Similar
    DEPRECIATION METHODS
    DECLINING METHODS
    Methods Computation of Depreciation
    Sum of the Years' Remaining EUL
    X Depreciable Cost
    Digit Sum of the Year's Digit

    Sum of the Half Remaining EUL (semi-annual)


    X Depreciable Cost
    Years' Digit Sum of the Half Year's Digit

    Double Declining Depreciation Rate = SLM x 2


    Balance Method Annual Depreciation Book value x Depreciation rate

    150% Declining Depreciation Rate = SLM x 1.50


    Balance Method Annual Depreciation Book value x Depreciation rate
    DEPRECIATION METHODS
    OTHER METHODS
    Inventory Retirement Replacement
    Method Method Method
    Beginning xxxx Beginning xxxx Beginning xxxx
    Cost of new acquisition xxxx Cost of new acquisition xxxx Cost of new acquisition xxxx
    Ending balance (xxxx) Tools retired Tools retired
    Cost of tools retired xxxx (at cost of tools retired) (xxxx) (at replacement cost) (xxxx)
    Ending balance xxxx Ending balance xxxx

    Cash (Salvage value) xxxx Cash (Salvage value) xxxx Cash (Salvage value) xxxx
    Depreciation expense xxxx Depreciation expense xxxx Depreciation expense xxxx
    Tools (squeezed) xxxx Tools (@ original cost) xxxx Tools (@ replacem ent) xxxx
    CHANGES IN DEPRECIATION
     Changes in the following are considered to be changes in accounting estimate:
    • Residual value
    • Estimated useful life
    • Depreciation method
     Change in accounting estimate is accounted for prospectively.
    ACCOUNTING POLICIES ON PPE
    SUBSEQUENT MEASUREMENT
    COST MODEL  PPE is carried at cost less accumulated depreciation and
    accumulated impairment losses
    REVALUATION  PPE is carried similar to cost model but revalued in case its fair value
    MODEL is significantly different from its carrying value.
     PPE is revalued at least every year-end
    • Elimination Approach
    ~ The balance of accumulated depreciation before revaluation
    is eliminated.
    • Proportional Approach
    ~ Both the asset and contra asset accounts are adjusted
    proportionately.
    Note: Regardless of the approach used, the revaluation
    surplus, carrying value, and the depreciation charges after the
    revaluation REMAINS THE SAME.
    REVALUATION MODEL
    COMPUTATION OF REVALUATION SURPLUS
    Before After Difference
    Cost/Replacement Cost/Appreciation xxxx xxxx xxxx
    Less: Revised Residual Value (xxxx) (xxxx) (xxxx)
    Balance xxxx xxxx xxxx
    Less: Accumulated Depreciation
    (based on the expired years over old EUL) (xxxx) (xxxx) (xxxx)
    Remaining Depreciable Amount xxxx xxxx xxxx
    Add: Revised Residual Value xxxx xxxx xxxx
    Book Value/Fair Value or Sound Value/Revaluation Surplus xxxx xxxx xxxx

    Revaluation Surplus is transferred to Retained Earnings as follows:


     Piecemeal - Same pattern of depreciation
     Lumpsum - Upon sale of PPE
    ACCOUNTING POLICIES ON PPE
    SUBSEQUENT MEASUREMENT
    Increase Decrease
    without prior without prior Increase with prior Decrease with prior
    decrease increase decrease increase
    Cost Model N/A Impairment Recovery of impairment Impairment Loss
    Loss loss previously
    recognized but not
    exceeding the original
    carrying value had it
    been no impairment.
    Revaluation Revaluation Impairment Recovery of Impairment Deduction from
    Model Surplus Loss Loss in P&L, any excess Revaluation Surplus, any
    An OCI Account is Revaluation Surplus excess is Impairment
    Loss

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