Questions & Answers
Component accounting for PPE (IAS 16) with examples
Component accounting in line with IAS 16 – what it is, how to apply it, practical example and real-life illustrations on real-life companies.
Amendment of IAS 16: Proceeds before intended use
Question In May 2020, IASB issued the amendment to IAS 16 applicable for the periods starting on or after January 1, 2022. This amendment says that we should not deduct any proceeds from selling items produced in the process of bringing the asset to the…
Testing goodwill for impairment
Question Our company acquired a subsidiary and goodwill on acquisition arose. According to IFRS, we have to test the goodwill for any impairment at least annually. How can we do it? The goodwill does not have any fair value and it’s not possible to determine…
Changing depreciation during the reporting period
Question We are a manufacturing company and we applied straight-line depreciation method for our assets. During the year, our company revised major production plans, compared them with useful lives of our assets and we found out that the change was necessary. Can we make the…
Acquisition of asset after testing period
Question We ordered a machine from a supplier. The details are as follows: 1 January 20X1: We pay the prepayment of 40%. 1 March 20X1: The supplier delivers a machine and we pay 50% of its price. The machine is ready to use. We have…
Can we avoid an impairment loss by the change in asset’s use?
Question Our company produces a few categories of products. Due to increasing competition in our country, one of our divisions started to make loss and we performed the impairment review of the assets within that division. We estimated future cash flows and found out that…
Missing information about long-term property at IFRS adoption – what to do?
Question We are a state-owned company and we are in the process of adopting IFRS. IFRS 1 First-time Adoption of International Financial Reporting Standards requires applying IAS 16 to our fixed asset as if it has always been applied. This is impossible, because we own…
Accounting for transfer of an asset from the owner-occupied PPE to the investment property
Question We apply the revaluation model for accounting for our buildings in line with IAS 16 Property, plant and equipment. Recently, we stopped using one of our buildings as our head office and we rented the building out to tenants. Consequently, we transferred this building…
Depreciation when asset is disposed off
Question Can we depreciate assets those are disposed of during the year? For instance, if one asset is used till October 10 and then sold on that day. Do we have to charge depreciation for the asset till October 10, 2020 since we have used…
Asset held for sale not sold after 1 year
Question Our company decided to sell the asset and classified it as held for sale in line with IFRS 5. After 1 year, we are still not able to sell this asset. What shall we do? How shall we report it in our accounts since…
Depreciation of ROU related to land
Question We entered into a contract to lease a plot of land. We will be using the land for 20 years and then we will vacate it and return it to its legal owner. We are aware that under IFRS 16, we need to account…
New window blinds in a leased office
Question We took an office under the lease and we installed the new window blinds. How do we treat the expenses for the window blinds? Do we add it to the ROU asset? Or directly in profit or loss as an expense? Answer These…
