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Lecture 9

RSM220H1 Lecture Notes - Lecture 9: Operating Expense, Lump Sum, Book ValuePremium

3 pages65 viewsSpring 2018

Rotman Commerce
Course Code
Amy Kwan

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Not intended for sale in ordinary course of business
Held for use in production of goods and services, for rental to others, or for administrative
Usually depreciated
Used over more than one accounting period
Cost measured reliably
If cost incurred but recognition criteria are not met, costs are recognized as expense
Recognize building as one asset, or separately as foundation, frame, windows, etc?
Significance of individual as parts to whole
Only separate if significant portion of total cost
Differing useful lives
Different patterns of delivering economic benefits
Use professional judgement
Degree of componentization is not specified by IFRS/ASPE
Purchase price net of discounts, plus non-refundable purchase taxes and duties
Ready it for use
Expenditures to bring asset to required location and operation
Estimate of costs associated with asset's eventual disposal
Acquisitions made for environmental or safety reasons
Some costs do not directly increase future economic benefit of an existing item of PPE
but are necessary for entity to obtain future economic benefits
Recognition of costs ceases when item is in the location and condition necessary for it to be
capable of operating in the manner intended by management
Initial operating loss
Cost of training to use asset
Cost of reorganization of operations
Not capitalized:
Day to day servicing costs are recognized as profit/loss
Cost of parts requiring replacement at regular intervals recognized in the carrying amount
Cost of regular major inspections recognized in carrying amount
Subsequent costs
Capitalize only directly attributable costs
Self-constructed assets
Add to cost of PPE
Capitalize avoidable borrowing costs directly attributable to cost of
acquiring/constructing/producing asset
Borrowing costs
Asset retirement costs
Added to PPE cost
Meet recognition criteria because necessary to be able to use asset
Obligation provision measured at present value
Dismantling and restoration costs
Cash price equivalent at recognition date
Use net-of-discount amount, regardless of whether discount has been taken
Should not deduct discount because terms of discount may be unfavorable
Cash discounts
Use cash-price equivalent
Cost is present value of consideration on transaction date
Recognize difference between total payment an fair value as interest
Deferred payment
Measurement of cost
Week 9: Property, Plant, and Equipment
March 19, 2018
RSM220 Page 1
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