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7/31/2019 Ac 120 Lecture 39 Frs 15
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7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsValuation:
Carrying value of TFA:
Fixed Assets may be stated at Historical
Cost less depreciation or
Fixed assets may be stated at Current
Value less depreciationCarrying value should never exceed
recoverable amount
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsValuation:
TFA should be re-valued only where
the entity adopts a policy of revaluationApply to individual classes of TFA
Where a TFA is re-valued, its carrying
amount should be its current value atBS date
Annual revals are not required
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsValuationsContd
Full valuation at least every five years,
interim in year 3 Where material change in value likely, re-
value in years 1,2,4 also
Material reasonably influence the decisionsof a user of the accounts
Full valuation conducted by qualified valuer
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsClass of Assets:
All TFA of same class should be re-valued
Companies Legislation categories: Land and Buildings
Plant & Machinery
Fixtures, fittings, tools & equipment
Companies may adopt other, narrowerclasses, as appropriate to their business
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsReporting Revaluation Losses:
All reval losses that are caused by a
clear consumption of economicbenefits should be recognised in the
P&L a/c. (physical damage,
deterioration in quality of serviceprovided by asset)
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsReporting Gains on Revaluation
v Revaluation gains should be recognised inthe P&L a/c only to the extent (afteradjusting for subsequent depreciation) that
they reverse revaluation losses on the same
asset that were previously recognised in the
P&L a/c
v All other revaluation gains should berecognised in the STRGL
7/31/2019 Ac 120 Lecture 39 Frs 15
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7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsGains/Losses on Disposal
Include in the P&L the difference
between:
Net sales proceeds
Carrying amount
(Per FRS 3)
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsDisclosures where assets revalued: For each class of re-valued assets:
Names and qualifications of valuers
Basis of valuation Date and amount of valuation
Carrying amount had assets been includedunder HC
Whether the person carrying out the valuation isinternal or external
Where valuation had not been updated or is nota full valuation, the date of the last full valuation
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
Assets
Depreciation
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsDepreciation
Depreciable Amount of TFA should be
allocated on a systematic basis over itsuseful economic life.
The depreciation method used shouldreflect as fairly as possible the pattern in
which economic benefits are consumedDepreciation charge for each period is
expensed to the P&L account
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsObjective of Depreciation:
Reflect the cost of use of the TFA in the
period
That is the amount of economic benefitconsumed
The cost to the entity of using the asset togenerate its revenues
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsWhere asset re-valued:
Depreciation is based on re-valued
amount
Depreciation is based on the
remaining UEL
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsMethods of Depreciation:
Most Common
Straight-line
Reducing balance
If uncertain of consumption of benefits
use straight line
7/31/2019 Ac 120 Lecture 39 Frs 15
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7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsWhere TFA comprises two or more
major components with substantially
different UEL, each component shouldbe accounted for separately for
depreciation purposes (e.g. land and
buildings, buildings and the fittings)
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsNon-depreciation of TFA?
Maintenance or refurbishment is carried
out regularly, significantly extending theUEL or maintaining the Residual Value ofthe asset
ASB states that subsequent expenditure
that maintains or enhances the previouslyassessed standard of performance of theasset does not negate the need to chargedepreciation
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsHowever, some TFAs may have very
long useful economic lives and thus
the depreciation charge may beimmaterial
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsWhen No Depreciation is permissable:
Land
Depreciation may not be charged
where that charge would be
immaterial:
Depreciation may be immaterial if:
Asset has a very long useful life
Asset has a high residual value
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsUEL and Residual Value
UEL should be reviewed at the end of each
period and revised if expectations aresignificantly different from previousestimates
Where residual value is material, it should
be reviewed at the end of each reportingperiod to take account of expectedtechnological changes based on pricesprevailing at the date of acquisition
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
Assets
Disclosures
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsDisclosures:
The following information should be disclosed
separately in the FS for each Class of TFADepreciation method
UEL
Total depreciation charged
Financial effect of a change during theperiod in either the estimate of UEL or theestimate of residual values
7/31/2019 Ac 120 Lecture 39 Frs 15
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FRS 15 Tangible Fixed
AssetsCost or re-valued amount at beginning and
at BS date
Cumulative amount of provisions fordepreciation or impairment at the beginningof the period and at BS date
Reconciliation of movements, separately
disclosing additions, disposals, re-valuations, transfers, depreciation,impairment losses, and reversals of pastimpairment losses written back
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FRS 15 Tangible Fixed
Assets Net carrying amount at beginning
and at BS date
Where there is a change in
depreciation method, the effect, and
reason for the change should bedisclosed.