DOCSLIB.ORG

IAS 16 Property, Plant and Equipment

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
IAS 16 Property, Plant and Equipment 1 | IAS 16 Property, plant and equipment IAS 16 PROPERTY, PLANT AND EQUIPMENT FACT SHEET 2 | IAS 16 Property, plant and equipment This fact sheet is based on existing requirements as at 31 December 2015 and it does not take into account recent standards and interpretations that have been issued but are not yet effective. IMPORTANT NOTE This fact sheet is based on the requirements of the International Financial Reporting Standards (IFRSs). In some jurisdictions, the IFRSs are adopted in their entirety; in other jurisdictions the individual IFRSs are amended. In some jurisdictions the requirements of a particular IFRS may not have been adopted. Consequently, users of the fact sheet in various jurisdictions should ascertain for themselves the relevance of the fact sheet to their particular jurisdiction. The application date included below is the effective date of the initial version of the standard unless otherwise stated. 3 | IAS 16 Property, plant and equipment IASB APPLICATION DATE (NON-JURISDICTION SPECIFIC) IAS 16 was reissued in December 2003 and is applicable for annual reporting periods commencing on or after 1 January 2005. OBJECTIVE The objective of IAS 16 is to prescribe the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about an entity’s investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them. SCOPE IAS 16 shall be applied in accounting for property, plant and equipment except for: • property, plant and equipment classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations; • biological assets related to agricultural activity – refer IAS 41 Agriculture; • recognition and measurement of exploration and evaluation assets – refer IFRS 6 Exploration for and Evaluation of Mineral Resources; or • mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. 4 | IAS 16 Property, plant and equipment RECOGNITION AND MEASUREMENT Measurement after recognition After initial recognition, the entity may choose between Recognition and initial measurement the cost model and the revaluation model as its accounting The cost of an item of property, plant and equipment policy. The policy chosen shall be applied to an entire class is recognised as an asset if, and only if: of property, plant and equipment. a. it is probable that future economic benefits Cost Model associated with the item will flow to the entity; and Cost less any accumulated depreciation and any b. the cost of the item can be measured reliably. accumulated impairment losses. The costs of day-to-day servicing of an asset are Revaluation Model not included in the carrying amount of the asset but Fair value at the date of revaluation, less any subsequent expensed when incurred. accumulated depreciation and any subsequent An item of property, plant and equipment that satisfies accumulated impairment losses. Revaluations are to be the recognition criteria is measured at cost. made with sufficient regularity that the carrying amount The cost of an item of property, plant and equipment does not differ materially from that which would be comprises: determined using fair value at the end of the reporting period. a. its purchase price; including duties and taxes, less trade discounts and rebates; If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that b. any costs directly attributable to bringing the asset asset belongs is revalued. to the location and condition necessary for it to be capable of operating in the manner intended by The accounting treatment prescribed by IAS 16 management; and is summarised in Diagram 1. c. the initial estimate of the costs of dismantling and removing the items and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. 5 | IAS 16 Property, plant and equipment DIAGRAM 1: ACCOUNTING FOR PPE Carrying value of PPE class is cost less accumulated depreciation and any accumulated impairement losses Cost Model for each class of PPE Tangible PPE Measurement qualifies for Recognised directly in other Cost subsequent OR recognition comprehensive income and to recognition Revaluation increases as an asset Measurement accumulated in equity under the carrying value of at recognition heading of Revaluation Surplus an asset (unless reversing a previous decrease of same asset previously Revaluation recognised in profit or loss). Model of each class of PPE Revaluation decreases Recognised in profit or loss (unless carrying value reversing a previous increase of of an asset same asset previously recognised Carrying value of PPE in other comprehensive income) class is fair value at date of revaluation less any subsequent accumulated depreciation and accumulated impairment loss 6 | IAS 16 Property, plant and equipment Depreciation Impairment • Each part of an item of property, plant and equipment IAS 36 Impairment of Assets is applied in determining with a cost that is significant in relation to the total cost whether an item of property, plant and equipment is of the item shall be depreciated separately. impaired and the determination of its recoverable amount. • Depreciation of an asset begins when it is available Derecognition for use, that is, when it is in the location and condition The carrying amount of an item of property, plant and necessary for it to be capable of operating in the equipment is derecognised on disposal; or when no future manner intended by management. economic benefits are expected from its use or disposal. • The depreciation charge for each period is recognised Any gain or loss arising from a derecognition is included in in profit or loss unless it is included in the carrying profit or loss when the derecognition occurs. Gains are not amount of another asset such as inventory conversion be classified as revenue. costs (IAS 2 Inventories) or the cost of an intangible asset (IAS 38 Intangible Assets). • The depreciable amount of an asset is allocated on a systematic basis over its useful life. • The method of depreciation used should reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity (these methods include the straight-line method, the diminishing balance method and the units of production method). • The residual value and the useful life of an asset shall be reviewed at least at the end of each annual reporting period and, if expectations differ from previous estimates, the changes shall be accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. 7 | IAS 16 Property, plant and equipment DISCLOSURES Refer to Appendix 1 for a checklist to assist with IAS 16 disclosure requirements. DEFINITIONS Carrying amount The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses. Cost The amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction. Depreciable amount The cost of an asset, or other amount substituted for cost, less its residual value. Depreciation The systematic allocation of the depreciable amount of an asset over its useful life. Entity-specific value The present value of the cash flows an entity expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability. Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Impairment loss The amount by which the carrying amount of an asset exceeds its recoverable amount. Property, plant and equipment Tangible items that are: • held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; • expected to be used during more than one period. Recoverable amount The higher of an asset’s fair value less costs to sell and its value in use. Residual value The estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Useful life The period over which an asset is expected to be available for use by an entity or the number of production or similar units expected to be obtained from the asset by an entity. 8 | IAS 16 Property, plant and equipment RELATED INTERPRETATIONS • IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities • IFRIC 18 Transfers of Assets from Customers • IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine • SIC 29 Service Concession Arrangements: Disclosures IFRIC 18 and IFRIC 20 are relatively more significant than the others. IFRIC 18 applies to the accounting for transfers of items of property, plant and equipment by entities that receive such transfers from their customers. It also applies to agreements in which an entity receives cash from a customer when that amount of cash must be used only to construct or acquire an item of property, plant and equipment (PP&E) and the entity must then use the item of PP&E either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or to do both.
Load more

Recommended publications
  • IFRS in Your Pocket 2019.Pdf
    IFRS in your pocket 2019 Contents Abbreviations 1 Foreword 2 Our IAS Plus website 3 IFRS Standards around the world 5 The IFRS Foundation and the IASB 7 Standards and Interpretations 15 Standards and Interpretations 24 Summaries of Standards and Interpretations in effect at 1 January 2019 29 Requirements that are not yet mandatory 100 IASB projects 104 Deloitte IFRS resources 111 Contacts 113 IFRS in your pocket |2019 Abbreviations ARC Accounting Regulatory Commission ASAF Accounting Standards Advisory Forum DP Discussion Paper EC European Commission ED Exposure Draft EFRAG European Financial Reporting Advisory Group GAAP Generally Accepted Accounting Principles IAS International Accounting Standard IASB International Accounting Standards Board IASC International Accounting Standards Committee (predecessor to the IASB) IFRIC Interpretation issued by the IFRS Interpretations Committee IFRS International Financial Reporting Standard IFRS Standards All Standards and Interpretations issued by the IASB (i.e. the set comprising every IFRS, IAS, IFRIC and SIC) PIR Post-implementation Review SEC US Securities and Exchange Commission SIC Interpretation issued by the Standing Interpretations Committee of the IASC SMEs Small and Medium-sized Entities XBRL Extensible Business Reporting Language XML Extensible Markup Language 1 IFRS in your pocket |2019 Foreword Welcome to the 2019 edition of IFRS in Your Pocket. It is a concise guide of the IASB’s standard-setting activities that has made this publication an annual, and indispensable, worldwide favourite. At its core is a comprehensive summary of the current Standards and Interpretations along with details of the projects on the IASB work plan. Backing this up is information about the IASB and an analysis of the use of IFRS Standards around the world.
    [Show full text]
  • Changes in Accounting Estimates—Disclosures
    Agenda ref 25B April 2016 STAFF PAPER REG IASB Meeting Review of IAS 8 Accounting Policies, Changes in Project Accounting Estimates and Errors Paper topic Changes in accounting estimates: disclosure CONTACT(S) Nadia Chebotareva [email protected] +44 (0) 20 7246 6457 Leonardo Piombino [email protected] +39 06 6976 6834 This paper has been prepared for discussion at a public meeting by the staff of the International Accounting Standards Board® (‘the Board’) and the OIC staff. It does not represent the views of the Board or the OIC or any individual member of the Board or the OIC. Comments on the application of IFRS® Standards do not purport to set out acceptable or unacceptable application of IFRS Standards. Technical decisions are made in public and reported in IASB Update. Background and purpose of the paper 1. As described in Agenda Paper 25A, in September 2014 the Board tentatively decided that the issue of distinguishing between a change in an accounting policy and a change in an accounting estimate, and any applicable thresholds for making changes and disclosures, should be considered as part of the Disclosure Initiative.1 The Board started its discussion of whether to add to IAS 8 any disclosure requirements for changes in accounting estimates in May 2015. 2. The purpose of this paper is to: (a) recommend not adding any new disclosure requirements to IAS 8 for changes in accounting estimates; and (b) recommend not doing any further work on the disclosure requirements for changes in accounting estimates in IFRS Standards. 3. The rest of this paper discusses: (a) Existing disclosure requirements for changes in accounting policies and accounting estimates—paragraphs 5-8 (b) Recommendation in May 2015—paragraphs 9-13 (c) Current recommendation—paragraphs 14-17 (d) Review of disclosure requirements in IFRS Standards—paragraphs 18-22.
    [Show full text]
  • Need to Know IASB Issues IFRS 16 – Leases
    GAAP clear vision Need to know IASB issues IFRS 16 – Leases In a nutshell and liabilities recognised in respect Observation of all leases (subject to limited • The new Standard provides exceptions for short‑term leases and The project’s original aim was the a comprehensive model for the leases of low value assets). production of a converged IFRS and identification of lease arrangements U.S. GAAP standard. However, the and their treatment in the financial • In contrast, the Standard does not IASB and FASB reached different statements of both lessees and include significant changes to the conclusions on a number of lessors. It supersedes IAS 17 Leases requirements for accounting by issues including the recognition and its associated interpretative lessors. and presentation of expenses by guidance. • Entities will need to consider the lessees. As a result, the FASB’s • IFRS 16 applies a control model to the impact of the changes introduced leasing standard (issued in February identification of leases, distinguishing by the Standard on, for example, IT 2016) differs from IFRS 16 in several between leases and service contracts systems and internal controls. respects. on the basis of whether there is an • Subject to EU endorsement, the identified asset controlled by the Standard is effective for annual customer. periods beginning on or after 1 • Significant changes to lessee January 2019 with earlier application For more information please see accounting are introduced, with the permitted for entities that have the following websites: distinction between operating and also adopted IFRS 15 Revenue from www.iasplus.com finance leases removed and assets Contracts with Customers.
    [Show full text]
  • Property, Plant and Equipment
    HKAS 16 Revised June 2020August 2020 Hong Kong Accounting Standard 16 Property, Plant and Equipment HKAS 16 (June 2020) COPYRIGHT © Copyright 2020 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial Reporting Standard contains IFRS Foundation copyright material. Reproduction within Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and inquiries concerning reproduction and rights for commercial purposes within Hong Kong should be addressed to the Director, Finance and Operation, Hong Kong Institute of Certified Public Accountants, 37/F., Wu Chung House, 213 Queen's Road East, Wanchai, Hong Kong. All rights in this material outside of Hong Kong are reserved by IFRS Foundation. Reproduction of Hong Kong Financial Reporting Standards outside of Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Hong Kong should be addressed to the IFRS Foundation at www.ifrs.org. Further details of the copyright notice form IFRS foundation is available at http://app1.hkicpa.org.hk/ebook/copyright-notice.pdf © Copyright 2 HKAS 16 (March 2010February 2014) CONTENTS HONG KONG ACCOUNTING STANDARD 16 PROPERTY, PLANT AND EQUIPEMENT from paragraph INTRODUCTION IN1 OBJECTIVE 1 SCOPE 2 DEFINITIONS 6 RECOGNITION 7 Initial costs 11 Subsequent costs 12 MEASUREMENT AT RECOGNITION
    [Show full text]
  • International Accounting Standards
    Teacher Guidance for 9706 Accounting on International Accounting Standards Cambridge International AS & A Level Accounting 9706 For examination from 2023 Version 1 In order to help us develop the highest quality resources, we are undertaking a continuous programme of review; not only to measure the success of our resources but also to highlight areas for improvement and to identify new development needs. We invite you to complete our survey by visiting the website below. Your comments on the quality and relevance of our resources are very important to us. www.surveymonkey.co.uk/r/GL6ZNJB Would you like to become a Cambridge International consultant and help us develop support materials? Please follow the link below to register your interest. www.cambridgeinternational.org/cambridge-for/teachers/teacherconsultants/ Copyright © UCLES 2020 Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge. UCLES retains the copyright on all its publications. Registered Centres are permitted to copy material from this booklet for their own internal use. However, we cannot give permission to Centres to photocopy any material that is acknowledged to a third party, even for internal use within a Centre. Contents Introduction ...............................................................................................................................4 IAS
    [Show full text]
  • Leases a Guide to IFRS 16
    Leases A guide to IFRS 16 June 2016 This guide contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this guide, rendering professional advice or services. Before making any decision or taking any action that might affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this guide. © 2016. For information, contact Deloitte Touche Tohmatsu Limited. Extracts from International Financial Reporting Standards and other International Accounting Standards Board material are reproduced with the permission of the IFRS Foundation. Leases | A guide to IFRS 16 Foreword This guide is intended to assist preparers and users of financial statements to understand the impact of IFRS 16 Leases, issued in January 2016 and effective for accounting periods beginning on or after 1 January 2019. We begin with a high-level executive summary of the new requirements, followed by a specific focus on the important issues and choices available for entities on transition to the new Standard. Our detailed guide covers the requirements of the new Standard, supplemented by interpretations and examples to give clarity to those requirements, and pointers regarding practical issues that are likely to arise. In the appendices, we provide: • a summary of the important illustrative examples accompanying IFRS 16 dealing with the identification of leases; • convenient checklists for IFRS 16’s presentation and disclosure requirements (separately for lessees and lessors); and • a brief comparison with US Generally Accepted Accounting Principles (US GAAP).
    [Show full text]
  • Ipsas 12—Inventories
    IPSAS 12—INVENTORIES Acknowledgment This International Public Sector Accounting Standard (IPSAS) is drawn primarily from International Accounting Standard (IAS) 2 (Revised 2003), “Inventories,” published by the International Accounting Standards Board (IASB). Extracts from IAS 2 are reproduced in this publication of the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) with the permission of the International Accounting Standards Committee Foundation (IASCF). The approved text of the International Financial Reporting Standards (IFRSs) is that published by IASB in the English language, and copies may be obtained directly from IASB Publications Department, 30 Cannon Street, London EC4M 6XH, United Kingdom. E-mail: [email protected] Internet: http://www.iasb.org IFRSs, IASs, Exposure Drafts, and other publications of the IASB are copyright of the IASCF. “IFRS,” “IAS,” “IASB,” “IASCF,” “International Accounting Standards,” and “International Financial Reporting Standards” are trademarks of the IASCF and should not be used without the approval of the IASCF. IPSAS 12 314 December 2006 IPSAS 12—INVENTORIES CONTENTS Paragraph SECTOR PUBLIC Introduction ............................................................................................. IN1–IN14 Objective .................................................................................................. 1 Scope ....................................................................................................... 2–8
    [Show full text]
  • The Application of Ias 2 Inventories Standard in Accounting Practices, BMIJ, (2020), 8(2): 2414-2430 Doi
    Research Article BUSINESS & MANAGEMENT STUDIES: ISSN: 2148-2586 AN INTERNATIONAL JOURNAL Vol.:8 Issue:2 Year:2020, 2414-2430 Citation: Boydas Hazar H., The Application Of Ias 2 Inventories Standard In Accounting Practices, BMIJ, (2020), 8(2): 2414-2430 doi: http://dx.doi.org/10.15295/bmij.v8i2.1496 THE APPLICATION OF IAS 2 INVENTORIES STANDARD IN ACCOUNTING PRACTICES Hülya BOYDAŞ HAZAR 1 Received Date (Başvuru Tarihi): 9/05/2020 Accepted Date (Kabul Tarihi): 22/06/2020 Published Date (Yayın Tarihi): 25/06/2020 ABSTRACT In this study, IAS 2 Inventories standard is examined and the real-world accounting applications related to inventories are presented.IAS 2 Inventories is an Keywords: accounting standard, which is part of the International Financial Accounting Standards (IFRS). It is the framework for the accounting treatment of inventories. Inventory makes IAS 2 up substantial part of the total asset value. Therefore, value determination and presentation IFRS of inventories is a fundamental part of accounting.The contribution of this work is highlighting the components which make up the value of inventories and the importance of Inventory choosing the inventory valuation method in managerial decision making. Moreover, Valuation Methods accounts are suggested for journal entries to record inventory related costs. JEL Codes: M11, M41 MUHASEBE UYGULAMALARINDA UMS 2 STOK STANDARDININ KULLANIMI ÖZ Bu çalışmada, UMS 2 Stoklar standardı incelenmiş ve stoklarla ilgili muhasebe Anahtar Kelimeler: uygulamalarına yer verilmiştir.UMS 2 Stoklar, Uluslararası Finansal Muhasebe Standartlarının (UFRS) bir parçası olan bir muhasebe standardıdır. Stokların UMS 2 muhasebeleştirilmesi ile ilgili temel bilgileri verir. Stoklar, toplam varlık değerinin önemli UFRS bir bölümünü oluşturur.
    [Show full text]
  • Financial Instruments: Recognition and Measurement
    International Exposure Draft 38 Public Sector April 2009 Accounting Comments are requested by July 31, 2009 Standards Board Proposed International Public Sector Accounting Standard Financial Instruments: Recognition and Measurement REQUEST FOR COMMENTS The International Public Sector Accounting Standards Board, an independent standard-setting body within the International Federation of Accountants (IFAC), approved this Exposure Draft, “Financial Instruments: Recognition and Measurement,” for publication in April 2009. The proposals in this Exposure Draft may be modified in light of comments received before being issued in final form. Please submit your comments, preferably by email, so that they will be received by July 31, 2009. All comments will be considered a matter of public record. Comments should be addressed to: Technical Director International Public Sector Accounting Standards Board International Federation of Accountants 277 Wellington Street, 4th Floor Toronto, Ontario M5V 3H2 CANADA Email responses should be sent to: [email protected] and [email protected] Copies of this exposure draft may be downloaded free-of-charge from the IFAC website at http://www.ifac.org. Copyright © April 2009 by the International Federation of Accountants (IFAC). All rights reserved. Permission is granted to make copies of this work provided that such copies are for use in academic classrooms or for personal use and are not sold or disseminated and provided that each copy bears the following credit line: “Copyright © April 2009 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact [email protected] for permission to reproduce, store or transmit this document.” Otherwise, written permission from IFAC is required to reproduce, store or transmit, or to make other similar uses of, this document, except as permitted by law.
    [Show full text]
  • IAS 2 – Inventories
    IAS 2 – Inventories By Mr. Conor Foley, B. Comm., MAcc., FCA, Dip IFR Examiner: Formation 2 Financial Accounting This article provides information and application in relation to IAS 2 – Inventories. Inventories – What are they? Inventories, per paragraph 6 of IAS 2 are assets that are a) Held for sale in the ordinary course of business b) In the process of production for such sale; or c) In the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventories per IAS 2 comprise a) Merchandise b) Production Supplies c) Materials d) Work in Progress e) Finished Goods In the case of a service provider, inventories include the costs of the service for which the entity has not yet recognised the related revenue. These costs consist primarily of the labour and other costs of personnel directly engaged in providing the service, including supervisory personnel and attributable overheads. Labour and others costs relating to sales and general administrative personnel are not included but are recognised as expenses in the period in which they are incurred. Valuation of Inventories Inventories are measured at the lower of a) Cost Or b) Net Realisable Value (NRV) Page 1 of 9 Each item of inventory is valued separately. Example 1 Suppose a company has three items of inventories on hand at the year-end. Their costs and NRVs are as follows: Item Cost - € NRV - € Lower of Cost/NRV - € 1 36 40 2 28 24 3 46 48 110 112 Calculate the closing value of inventory at the year-end? Solution Example 1 It would be incorrect to compare the total cost of €110 with total NRV of €112 and state inventories as €110.
    [Show full text]
  • Applying IFRS: Accounting for the Financial Impact of Natural Disasters
    Applying IFRS Accounting for the financial impact of natural disasters December 2017 Contents Overview 3 1. Asset impairments 3 2. Insurance recoveries 5 2.1 Property, plant and equipment 5 2.2 Business interruption 8 2.3 Other recoveries 8 2.4 Presentation of insurance proceeds 9 3. Hedge accounting 9 4. Restructuring 10 4.1 Recognition 10 4.2 Measurement 11 5. Decommissioning obligations 12 6. Other considerations 13 6.1 Future operating losses 13 6.2 Onerous contracts 13 6.3 Constructive obligations 14 6.4 Contingent liabilities 14 6.5 Expenditure to be settled by a third party 15 6.6 Going concern 15 7. Classification in the statement of comprehensive income 15 8. Financial statement disclosure requirements 16 8.1 Impairments 16 8.2 Provisions 17 8.3 Contingent liabilities 17 8.4 Contingent assets 17 8.5 Reduced disclosures for seriously prejudicial information 18 8.6 Sources of estimation uncertainty 18 8.7 Subsequent events 19 1 December 2017 Accounting for the financial impact of natural disasters What you need to know • As communities begin the process of recovering from the tragedy of a natural disaster, entities operating in those locations, or providing goods and services in them, raise questions about the related financial reporting effects under IFRS. • Entities may incur impairments to assets both directly and indirectly related to operations in the affected region. • Future operating losses do not meet the definition of a liability and are recognised in periods in which the losses are incurred. • Insurance recoveries are recognised only when it is determined that the entity has insurance cover for the incident and a claim will be settled by the insurer.
    [Show full text]
  • IFRS 16 – an Overview
    IFRS 16 – An overview The new normal for lease accounting March 2021 home.kpmg/ifrs Contents 1 IFRS 16 at a glance 2 7 Lease modifications 68 1.1 Key facts 2 7.1 Definition 68 1.2 Key application issues 3 7.2 Lessee modification accounting 70 7.3 Lessor modification accounting 75 2 Lessee accounting 4 2.1 Lessee accounting model 4 8 Sub-leases 80 2.2 Initial measurement of the lease liability 5 9 Sale-and-leaseback 82 2.3 Initial measurement of the right-of-use asset 11 2.4 Subsequent measurement of the lease liability 12 Appendix I: List of examples 86 2.5 Subsequent measurement of the right-of-use Keeping in touch 88 asset 15 2.6 Recognition exemptions for lessees 17 About this publication 90 2.7 Presentation and disclosure 20 Acknowledgements 90 3 Lessor accounting 23 3.1 Lessor accounting model 23 3.2 Lease classification 24 3.3 Operating lease model 27 3.4 Finance lease model 28 3.5 Presentation and disclosure 29 4 Lease definition 31 4.1 Overview 31 4.2 Identified asset 32 4.3 Economic benefits from using the asset 38 4.4 Right to direct the use 40 5 Separating components 46 5.1 Overview 46 5.2 Identify separate lease components 46 5.3 Identify separate non-lease components 48 5.4 Allocate the consideration 50 5.5 Allocate the variable consideration 53 6 Lease term 56 6.1 Overview 56 6.2 The non-cancellable period 57 6.3 The enforceable period 57 6.4 The reasonably certain threshold 60 6.5 Renewable and cancellable leases 62 6.6 Changes in the lease term 64 The new normal for lease accounting IFRS 16 Leases has now been successfully adopted by companies reporting under IFRS® Standards.
    [Show full text]