PLz Someone Describe This Para Of IAS 16.

PLz Someone Describe This Para Of IAS 16. - Printable Version

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PLz Someone Describe This Para Of IAS 16. - Arabian - 11-03-2009

70
If, under the recognition principle in paragraph 7, an entity recognises in the carrying amount of an item of
property, plant and equipment the cost of a replacement for part of the item, then it derecognises the carrying
amount of the replaced part regardless of whether the replaced part had been depreciated separately. If it is not
practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the
replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.

Can Any one Explain this By any Example.Especially Last line.

- danishayub_76 - 11-04-2009

Last Line

If it is not possible to calculate the amount of replaced part of the machinery/plant then an entity can calculate this value on the basis of current cost of the same part of that machinery/plant.

regards

- rabia-k - 11-04-2009

example
This case study is concerned with subsequent costs.
Facts
Road Truckers Inc. has acquired a heavy road transporter at a cost of $100,000 (with no breakdown of the component parts). The estimated useful life is 10 years. At the end of the sixth year, the power train requires replacement, as further maintenance is uneconomical due to the off-road time required. The remainder
of the vehicle is perfectly roadworthy and is expected to last for the next four years. The cost of a new power train is $45,000.
Required
Can the cost of the new power train be recognized as an asset, and, if so, what treatment should be used?

Solution
The new power train will produce economic benefits to Road Truckers Inc., and the cost is measurable. Hence the item should be recognized as an asset. The original invoice for the transporter did not specify the cost of the power train; however, the cost of the replacementâ$45,000âcan be used as an indication (usually by discounting) of the likely cost, six years previously. If an appropriate discount rate is 5%
per annum, $45,000 discounted back six years amounts to $33,500 [$45,000 / (1.05)]6, which would be written out of the asset records. The cost of the new power train, $45,000, would be added to the asset record, resulting in a new asset cost of $111,500 ($100,000 â $33,500 + $45,000).

source IFRS Practical Implementation Guide and Workbook Second Edition Abbas Ali Mirza Magnus Orrell Graham J. Holt

- Arabian - 12-24-2009

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by danishayub_76
 Last Line

If it is not possible to calculate the amount of replaced part of the machinery/plant then an entity can calculate this value on the basis of current cost of the same part of that machinery/plant.

regards
<hr height="1" noshade id="quote"></blockquote id="quote">

Thanks For reply

- Arabian - 12-24-2009

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by rabia-k
 example
This case study is concerned with subsequent costs.
Facts
Road Truckers Inc. has acquired a heavy road transporter at a cost of $100,000 (with no breakdown of the component parts). The estimated useful life is 10 years. At the end of the sixth year, the power train requires replacement, as further maintenance is uneconomical due to the off-road time required. The remainder
of the vehicle is perfectly roadworthy and is expected to last for the next four years. The cost of a new power train is $45,000.
Required
Can the cost of the new power train be recognized as an asset, and, if so, what treatment should be used?

Solution
The new power train will produce economic benefits to Road Truckers Inc., and the cost is measurable. Hence the item should be recognized as an asset. The original invoice for the transporter did not specify the cost of the power train; however, the cost of the replacement$45,000can be used as an indication (usually by discounting) of the likely cost, six years previously. If an appropriate discount rate is 5%
per annum, $45,000 discounted back six years amounts to $33,500 [$45,000 / (1.05)]6, which would be written out of the asset records. The cost of the new power train, $45,000, would be added to the asset record, resulting in a new asset cost of $111,500 ($100,000 $33,500 + $45,000).

source IFRS Practical Implementation Guide and Workbook Second Edition Abbas Ali Mirza Magnus Orrell Graham J. Holt

<hr height="1" noshade id="quote"></blockquote id="quote">

Thanks For Reply,

- stu79 - 12-06-2010

Thanks for the information on here!
Stu

- mudassar2704 - 12-06-2010

Good explanation