Non-current assets Essay Example | Topics and Well Written Essays - 1250 words - 1

Non-current assets - Essay Example The effective date on the basis of IASB was the fiscal periods on or after the financial year ending on 2004. Differences in accounting treatment The accounting standard of IAS 16 refers to the tangible noncurrent assets as property, plant and equipment and identifies that they hold a physical substance which can be used for delivery of goods or services or for purposes of administration. The physical substances are expected to be in use for more than a single accounting period. There are some problems accrued to the definition (Friedrich and Friedrich, 2009). Freehold as well as leasehold land, plants and machinery and buildings are included in the PPE. The aim of the accounting standard is to lay down the treatment for accounting relating to recognition of assets, the willpower of the carrying amounts and the charges of depreciation as well as the loses that relates to them. The accounting standard should be followed in the accounting process for PPE as using another PPE requires t he use of different treatment. A business should have the capability to recognize the associated risks and rewards correlated with the asset (Kelly, n.d. p. 1-3). The business controls the asset. The rewards are the custodies. The cost of risk and repairs are treated as costs. Any loss emerging from the assets are treated as costs as well. Under the accounting standard it is expected that the future anticipated economic benefit will find the way to the owner and the associated costs can be measured reliably. IAS 16 accounts for two models namely the cost model and the revaluation model for measuring PPE. In the first model, an item under PPE is carried at the cost which is less than the accumulated depreciation as well as less than any accumulated impairment losses. In the second model, the item in PPE is carried at fair value less than accumulated depreciation and impairment losses. The standard is in line with the definition of the asset set in IASB. It is possible to have a relia ble cost of PPE by the transaction cost of the market in cases where the asset has been acquired. The incidental acquisition cost includes the attributed cost of carrying the asset to the site (The Institute of Chartered Accountants of Pakistan, n.d.). The import duties, the cost of preparation of the sites and the fess of professionals are included in the incidental cost of acquisition. The inclusion ceases once the asset is made ready to use. The asset may not be brought into use but it should to ready to use. The costs that are excluded from the standard are cost of generating a new facility, overhead costs of the administration and the cost associated with introducing the new produced product. An obligation often arises to dismantle the product after the life cycle and the obligation is recorded s the liability at the time the asset is recognized. In the cases where the assets are self constructed the costs of the materials that were acquired, the costs related to labour and the other associated costs must be recognized. IAS 38 provides the definition of asset recognition and specifies the ways the carrying amounts should be measured in the following periods as well as guides on the disclosures. The accounting standard can be applied to all intangible assets except the assets that are within the scope of another standard. It is inapplicable to the intangible assets held by someone