Week 10- ACCT1101

• Nature of Property, Plant, and Equipment (PP&E): PP&E refers to tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. They are expected to be used for more than one accounting period.
• Computing the Cost of PP&E: The cost of PP&E includes all expenditures directly attributable to bringing the asset to its intended condition and location for use. This includes purchase price, delivery costs, installation costs, and any other directly attributable costs.
• Apportioning the Cost of a Lump-Sum Payment: When a lump-sum payment is made for multiple assets, the cost is allocated to each asset based on their relative fair values. This can be determined through appraisals or market values.
• Basics of Asset Acquisition Under a Lease Agreement: Assets acquired under a lease agreement are recorded based on whether it's a finance lease (where the lessee effectively owns the asset) or an operating lease (where the lessee only uses the asset).
• Nature of Depreciation and Determining Depreciation Expense: Depreciation is the systematic allocation of the cost of an asset over its useful life. Various methods like straight-line, declining balance, and units of production can be used to determine depreciation expense.
• Accounting for Subsequent Costs: Subsequent costs incurred for PP&E, such as maintenance, repairs, and upgrades, are usually capitalized if they increase the future economic benefits expected from the asset. Otherwise, they are expensed.
• Recording PP&E in Subsidiary Ledger: PP&E transactions are recorded in a subsidiary ledger, which contains detailed information about each asset, such as its description, cost, accumulated depreciation, and location.
• Reporting Requirements for PP&E and Depreciation: PP&E and depreciation are reported in an entity's financial reports, typically in the balance sheet (under non-current assets) and income statement (as depreciation expense).
• Analysing and Interpreting PP&E Information: Analysing PP&E information helps in understanding the asset's contribution to the business and informs management decisions regarding maintenance, replacement, or disposal of assets.
• Revaluation of Non-current Assets: Non-current assets may be revalued upwards or downwards to reflect their fair value. Any increase or decrease is recorded in the revaluation surplus or deficit.
• Write-down of Impaired Assets: If the carrying amount of an asset exceeds its recoverable amount (higher of fair value less costs to sell and value in use), the asset is written down to its recoverable amount, recognizing an impairment loss.
• Derecognition of Non-current Assets: Non-current assets are derecognized from the balance sheet when they are disposed of through scrapping, sale, or exchange. Any gain or loss on disposal is recognized in the income statement.
• Depreciation Using Composite Rates: Composite rates are used when assets have different useful lives but are grouped together for depreciation calculation purposes.
• Accounting for Acquisition and Depletion of Mineral Resources: Mineral resources are initially recognized at cost and then depleted using units of production method or some other appropriate method as they are extracted and sold.
• Nature of Biological Assets and Agricultural Produce: Biological assets are living plants and animals, while agricultural produce is the harvested product from biological assets. They are accounted for at fair value less costs to sell.
• Nature of Intangible Assets and Accounting Challenges: Intangible assets lack physical substance and include patents, copyrights, trademarks, etc. Accounting for them can be challenging due to issues like valuation and determining useful life.
• Nature of Goodwill and Accounting Treatment: Goodwill arises when an entity acquires another entity and pays more than the fair value of its identifiable net assets. Goodwill is initially recognized at cost and subsequently tested for impairment annually.