First and foremost it’s important you go about and actually investigate into your property, plant and equipment items to identify all assets which don’t find any usage within your business, your production. Often enough I see that it’s not done and assets are carried on the balance sheet even if they’re fully depreciated and in reality not existing. There’s just clutter on your balance sheet that you should get rid of. Continue reading
Category Archives: 1.05 Property, Plant and Equipment
Assets not depreciating
We talk a lot about depreciation, however, as the situation may be, there are assets which don’t depreciate at all. Those are assets that you can technically use for as long as they exist and their value for your business wouldn’t change (unless their market value changes, which is another matter). Continue reading
Presenting property, plant and equipment as well as intangible assets on the statement of cash flows
Property, plant and equipment and intangible assets for the purpose of presentation on the statement of cash flows are reported partly under all of the three grouping of cash flows a company can have. Since there are many aspects of acquiring and measuring for tangible and intangible assets, it only makes sense they are also disclosed differently. Continue reading
Prepayments and construction in progress
Every now and then you’re required to make prepayments for an acquisition of asset. Or you’re constructing a building; or setting up machinery is taking time and setting up the place for the machine requires additional investments. How should you treat those transactions? Continue reading
Depreciation treatment for prepayments and construction in progress
When we think “depreciation”, we define it as reflecting on consuming future economic benefits arising from the asset. However, depreciation of an asset nonetheless begins when it’s available for use, that is, it is in the condition and location which are necessary for the asset to operate as intended. If you think about it, we cannot talk about economic benefits if the asset is still in store, can we? Continue reading
Different methods for depreciating assets
There are different types of depreciation methods used. IAS 16 for an example mentions the following methods: Continue reading
Depreciation
In essence, what does this “depreciation of property, plant and equipment” mean? IAS 16 defines depreciation as “systematic allocation of the depreciable amount of an asset over its useful life”. For easier understanding I think it’s important to tear the definition into pieces – systematic allocation, depreciable amount and useful life. Continue reading