The PowerPoint presentation (Analysis) is to be in a format acceptable for a professional presentation. The Analysis should include the following sections as a minimum.
This should state what the purpose of the report is, what Accounting theme is being explored, which company is being reviewed (if applicable), which standards / criteria are being applied etc.
This is where you include commentary around the COBIT and COSO frameworks and which parts should have been applied
Application of Accounting Criteria relevant for theme selected
Analysis this is the main body and provides your research findings
Summary of Findings this section highlights the key findings from your analysis
Recommendations this section summarises YOUR key recommendations and emphasises your JUDGEMENT
Answer:
Accounting for Property
The following conditions are to be satisfied for recognition of any cost spent on PPE as asset (AASB 116, para.7) Probable future economic benefits arising from the PPE Reliable measurement of the cost
Includes assets which do not directly contribute in any future economic benefits to the controlling entity (AASB 116, para.11)
Carrying amount of consumable and other PPE required for continuous servicing would not be recognised under PPE but rather as expenses under “Repair & Maintenance” (AASB 116, para.12)
For frequently replaced or inspected parts, derecognition of replaced parts and previous inspections must be done (AASB 116, para.13,14)
Measurement (Acquired Assets)
A PPE recognised as asset is to be measured at cost (AASB 116, para.15)
For not-for-profit entities, asset may be acquired for free and hence the fair value is to be considered (AASB 116, para.15.1)
Elements of Cost (AASB 116, para.16)
Purchase Price
Direct costs associated with transporting and installing the asset
Site restoration (including previous item removal)
Costs that are not included
Deployment costs incurred after the equipment is in place initially (AASB 116, para.20)
Relocation Costs
Initial Operating Losses
Incurred costs due to machine not being deployed despite being in deployable condition
Construction or Development cost related to the asset which are incurred despite not being considered necessary for intended use (AASB 116, para.21)
Measurement (Self-Constructed Asset)
Same principles apply as to acquired assets
Internal profits are eliminated
Any cost on wasted inputs such as raw material, labour would not be considered in the asset cost
Borrowing costs in accordance with AASB 123 is included in the asset cost
Measurement (After Initial Recognition)
Following two choices available to reporting entity (AASB 116, para.29)
Cost Model – Cost Minus Accumulated Depreciation and accumulated Impairment losses(if any) (AASB 116, para.30)
Revaluation Model – Fair Value Minus Accumulated Depreciation and accumulated Impairment losses(if any) (AASB 116, para.31)
Policy cannot be selectively applied and cover entire class of PPE
Revaluation Method (Details)
Frequency: Revaluation to be done whenever carrying value and fair value significantly differ. Minimum is once in 3-5 years (para.34) Revaluation has to be carried out in a class of PPE simultaneously (para. 36) Recognition of revaluation Increase/Decrease in revaluation amount (para.39) Balance sheet – Revaluation Surplus (Equity) Income Statement – Comprehensive income
Depreciation to be charged separately to all components of PPE having significant cost (para.43)
Depreciation charge to be recognised in P&L (para,48)
Depreciation method to be decided by the reporting entity considering the pattern of economic benefits arising from asset in future (para.60)
Method to be reviewed annually and change permissible only if change in pattern (para.61)
Disclosure
Measurement Bases (Determination of Gross Amount)
Depreciation Method
Depreciation rates deployed
Period beginning and ending carrying amount & depreciation
Reconciliation of carrying amount
Restrictions on Title & Amount
Construction related expense considered part of carrying cost
Contractual commitments for acquisition of PPE
Disclosures regarding Revaluation
Effective Date
Involvement of an independent valuer
Carrying amount recognised under cost method
Revaluation Surplus
References
AASB (2014), AASB 116- Property, Plant And Equipment, [online] Available at https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf [Accessed March 26, 2018]
AASB (2016), AASB 116, [online] Available at https://www.aasb.gov.au/admin/file/content102/c3/AASB116_07-04_ERDRjun10_07-09.pdf [Accessed March 26, 2018]
Australian Government (2004), Property, Plant & Equipment, [online] Available at https://www.legislation.gov.au/Details/F2005B00678 [Accessed March 26, 2018]
BHP (2017) Annual Report 2017, [online] Available at https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf [Accessed March 26, 2018]
Deegan, C. (2014). Financial Accounting Theory, 4th ed. Sydney: McGraw-Hill
