200536 Intermediate Financial Accounting

Homework Solutions for Tutorial

chapter 13
Comprehension questions
2.

(a)
(b)
5.

What are the recognition criteria for property, plant and equipment?
Para 7 of AASB 116 contains the following recognition criteria:
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
it is probable that future economic benefits associated with the item will flow to the entity; and
the cost of the item can be measured reliably.
What choices of measurement model exist subsequent to assets being initially recognised?
Para 29 of AASB 116 states:

An entity shall choose either the cost model in paragraph 30 or the revaluation model in paragraph 31 as
its accounting policy and shall apply that policy to an entire class of property, plant and equipment.
6.

What factors should entities consider in choosing alternative measurement models?

Relevance of information provided: generally current information is preferred to past information.

Reliability of the information: cost measures are generally more reliable than valuation measures.
Cost of providing the information: Adoption of the valuation model entails costs of valuation and audit.

IFA 200536

Solutions - chap 13

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