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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

<font color="purple">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. <font color="red">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.</font id="red"></font id="purple">

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

- bilalfca - 11-23-2011


take an example of a Motor Vehicle as an asset. the entity replaces the tyres (Old) of the vehicle and adds the cost of the New tyres in the CA(carrying Amount)of Vehicle.

The Co. will have to derecognise the CA of the replaced (old) tyres if that can be determined...

If CA of replaced tyres can not be determined, the Co. will have to make an estimate of the CA of replaced tyres by comparing it with the cost of the new tyres. Like, If new tyres costs. Rs. 20,000 definitely old tyres will not cost Rs. 20,000... it may be somewhat around Rs. 15,000 (say) in the year in which it is acquired.. So, if old tyres costed Rs. 15,000 (estimate), surely it would have loose its value to somewhat like Rs. 12,000 (as wear n tear etc)... So CA of replaced tyres would be Rs. 3,000 (15000-12000)

Rs. 3,000, the CA of replaced tyres, will be derecognised from the CA of Motor Vehicle.

NOTE these are totally my understandings and a different answer might be there..