After studying this chapter, you should be able to: identify the business importance and characteristics of property, plant and equipment and explain the recognition criteria; identify the costs to include in the measurement of property, plant and equipment at acquisition; determine asset cost when the transaction has delayed payment terms or is a lump-sum purchase, a nonmonetary exchange, or a contributed asset;. | 1 CHAPTER 10: PROPERTY, PLANT, AND EQUIPMENT: ACCOUNTING MODEL BASICS 2 Chapter 10: Property, Plant, and Equipment: Accounting Model Basics After studying this chapter, you should be able to: Identify the business importance and characteristics of property, plant and equipment and explain the recognition criteria. Identify the costs to include in the measurement of property, plant and equipment at acquisition. Determine asset cost when the transaction has delayed payment terms or is a lump-sum purchase, a nonmonetary exchange, or a contributed asset. Identify the costs included in the specific types of property, plant and equipment. Understand and apply the cost model and the revaluation model using the asset adjustment method. Understand and apply the fair value model. Explain and apply the accounting treatment for cost incurred after acquisition. 8. Identify the differences in accounting between ASPE and IFRS, and what changes are expected in the near future. 3 3 4 Property, Plant, and Equipment: Accounting Model Basics 4 Property, Plant, and Equipment Also known as tangible capital assets, plant assets, and fixed assets Examples: land, building, equipment, and natural resource properties Major characteristics include: 1. Acquired and held for use in operations and not for resale 2. Long-term in nature and usually subject to depreciation 3. Possess physical substance (tangible) 5 LO1 5 Asset Components Entities can incur many costs, but how do they know which ones should be recognized as an item of PP&E? Probable that the item’s future economic benefits will flow to the entity Cost can be reasonably measured If both conditions are met, the item is capitalized and recognized as a PP&E asset 6 LO1 6 Asset Components Both IFRS and ASPE require componentization, although IFRS guidance is more detailed Components of a single asset (. roof of a building) should be recognized separately if they make up a relatively significant portion of the asset’s total cost . | 1 CHAPTER 10: PROPERTY, PLANT, AND EQUIPMENT: ACCOUNTING MODEL BASICS 2 Chapter 10: Property, Plant, and Equipment: Accounting Model Basics After studying this chapter, you should be able to: Identify the business importance and characteristics of property, plant and equipment and explain the recognition criteria. Identify the costs to include in the measurement of property, plant and equipment at acquisition. Determine asset cost when the transaction has delayed payment terms or is a lump-sum purchase, a nonmonetary exchange, or a contributed asset. Identify the costs included in the specific types of property, plant and equipment. Understand and apply the cost model and the revaluation model using the asset adjustment method. Understand and apply the fair value model. Explain and apply the accounting treatment for cost incurred after acquisition. 8. Identify the differences in accounting between ASPE and IFRS, and what changes are expected in the near future. 3 3 4 Property, Plant,
