Textbook Notes (368,107)
Canada (161,650)
MGAC01H3 (34)
Daga (20)
Chapter 10

Chapter 10 Notes

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Financial Accounting

Chapter 10 Property Plant and Equipment Accounting Model Basics NotesRecognition and Cost ElementsProperty Plant and Equipment Assetsproperty plant and equipment are defined as assets that have the following characteristics1They are held for use in the production of goods and services for rental to others or for administrative purposes They are not intended for sale in the ordinary course of business2They are used over more than one accounting period and are usually depreciated Property plant and equipment provide services over many years Through periodic depreciation changes the cost of the investment in these assets with the usual exception of land is assigned to the periods that benefit from using them3They are tangible These assets have a physical existence or substance which makes them different from intangible assetsRecognition Principleaccounting standards require that the following two recognition criteria be satisfied1It is probable that the items associated future economic benefits will flow to the entity2Its cost can be measured reliablyCost Elementscosts capitalized include the following1The items purchase price net of trade discounts and rebates plus any nonrefundable purchase taxes and duties2The expenditure necessary to bring the asset to its required location and condition to operate as management intended These include employee costs needed to acquire or construct the asset delivery and handling costs site preparation installation and assembly costs net material and labour costs incurred to ensure it is working properly and professional fees3The estimate of the costs of obligations associated with the assets eventual disposal This includes for example some or all of the costs of the assets decommissioning and site restorationIFRSASPECapitalization of costs stops when the asset is in place and ready to Capitalization of costs stops when an asset is substantiallybe used as management intended even if it has not begun to becomplete and ready for productive use as determined in advance by used or is used at less than a desirable capacity levelmanagement in relation to factors such as reaching a given level of productive capacity occupancy level period of time or other industryspecific considerationThe principle of being a necessary cost to acquire and get in place Any net revenue or costs generated prior to substantial completion and ready for use is strictly applied
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