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Why this 150 provision should be included in PPE. I think it should be amortized as a development expenditure. According to IAS16,one of PPE’s defintion is carrying value will bring future economic benefit. This provision seems not?
And if recognized as part of PPE, the condition said this cost has been included in carrying value of mine. Why should be again added to debit side of PPE?
Also pls help me on the investing act.-investments (10)
-investment income received 5Hi,
Landscaping the affected area is a legal requirement, a compulsory cost to be incurred after 10 yrs. A provision is created. Also, this is to be capitalised to the cost of PPE and depreciated over the life of the asset.
Qn says this is included in the carrying amount. But, this is not included in the opening value of 940, bcoz the purchase was on 1 Oct 20X5.
When we prepare t a/c, we need to debit this 150 as we are starting with the opening value.There is an increase of 25,000 ( 150 – 125 ) in Investments. Of this, 15,000 is the increase in market value – no cash flow.
Remaining 10,000 increase must be an additional investment during the year and thus an outflow of cash.From SOCI, investment income and gain on investments is 20,000. Of this, 15,000 is the gain on investments (increase in market value) – no cashflow.
Remaining 5,000 is the income received – an inflow of cash.Hope that helps.
Thank God! Happy to learn your reply every time!!! 🙂
bcoz the purchase was on 1 Oct 20X5.—-Thanks for this.
And thanks for the details on investments explanation.Would you pls answer my other qns posted. Thank you. Thank you.
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