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Q1.If a building is 80% completed at year end, can i capitalised 80% of the cost first?
Q2. In year 2000, the useful life of a building is 20 years. In 2010, I discovered that the buildings should have a useful life of another 20 years. In that case, it is a change in accounting estimates and i should change the useful life under a prospective change by adusting the current and future figures? Can you give me an example using the restrospective change?
Since it is an error, i should adjust the useful life to 30 years starting from year 1 to adjust retrospectively?
Q1. Since it is a WIP, i can include 80% of the cost under the category inventories under current asset in financial position?
Oh dear, what a mess you’re getting into!
I assume that this is an exam question scenario rather than a real life situation. IF it were real life then, yes, reassess at each year end. However, this smacks of being a hypothetical exam question type situation. In that case, what you’re facing is a change in an accounting estimate (the estimated useful life) so this would not attract retrospective adjustment and restatement.
If the situation had involved an error (say, estimated useful life of 20 years but being written off over 15 years straight line) then that would call for a retrospective adjustment (but what were the auditors doing in the years before this error were detected)
In answer to your first question, I would have a separate category of “Asset under construction”. Until it is complete and in actual use (if it IS to be used in the company’s business activities) then do not charge depreciation. In addition, where this is a self-construct asset using own labour and materials and an acceptable element of overheads allocated, there should be no “charge-out” rates of pay applied and no profit element included within the costs to be capitalised
OK?
Elia …. this page is called “Ask the tutor” There’s a clue within the title as to who should be responding to these questions. Let me give you a hint here ….. it’s not you!
Q1. Can I put the asset under the heading inventories instead of having a separate category of “Asset under construction”?
No. If it’s being built to be held as inventory until sold, it should be treated as “Asset under construction” until it’s ready for sale. At that date, it should be re-classified as inventory
OK?
Hello!Teacher,MikeI am currently doing the IAS 16 & 40 .Can u help me again.
All revaluation reserves ,Gain on revaluation and impairment loss should be showed under SOP&L’s other comprehensive?why should not should under Equity section?Disclose at St of Changes in equity.I don’t know clearly that.I think that you’ll find that stuff going through statement of comprehensive income is also shown within statement of changes in equity. These are presentation points in order that the users of financial statements can better appreciate the results / performance of a company and see whence that performance has been achieved
Ok?
Yeah!Thanks Teacher.Revaluation reserves/Gain on revaluation/impairment loss are should not included under Financial position.Have Differences between IAS 16 & 40? Can u give me small example for that?
Revaluation Reserve features as a column in statement of changes in equity AND on the statement of financial position
Gain on revaluation features instatement of comprehensive income and in statement of changes in equity
Impairment loss features in statement of profit or loss and therefore affects the asset value on the statement of financial position
One big difference between IAS 16 and IAS 40 is that there’s no depreciation on an investment property
OK?
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