International Accounting Standards IAS 16 and IAS 38: Non-Current Assets Analysis

Learning Outcomes and Assignment Brief

Appraise and apply the regulatory framework of financial reporting 

Analyse and research International Accounting Standards. 

International Accounting Standard (IAS) 16 Property Plant & Equipment and IAS 38 Intangible Assets both deal with Non-Current Assets in the

Financial Statements. 

1: Required: Distinguish between the 2 types of Non-current assets, giving definitions recognition criteria and an explanation of the accounting treatment of both in the financial statements.

2: Omega Ltd question The following items of property plant and equipment were included in the records of Omega Ltd 1st February 2020: 
  
                                       Cost    Accumulated Depreciation  Carrying amount 
                                           €                          €                          €
Land and Buildings        468,000                -                         468,000
Plant and Machinery      352,000             198,400                 153,600
Fixtures and fitting         175,000              68,700                 106,300
Motor and Vehicles         120,000             82,000                 38,000
 
During the year ended 31st January 2021 the following occurred:

1. The charge depreciation on buildings at 2% per annum. Buildings represent €348,000 of the amount at 1st Feb 2020. The buildings were bought new on 1st Feb 2020. 

2. An item of plant costing €88,000 on 1st July 2018 is now recognised as having a useful life of only five years in total. 

3. New plant was acquired for €100,000 on 1st August 2020 and the company received a government grant of €20,000 towards the cost. The company uses the deferred credit method in accounting for government grants. 

4. On 30th September 2020 a vehicle which was originally purchased for €19,000 during the year ended 31st January 2019 was traded in at a value of €13,000 against a new model costing €28,000. 

5. Fixtures which had cost €22,000, and were fully depreciated, were scrapped in November 2020. 

6. During November 2020 the company incurred expenditure of €85,000 on developing projects which are considered technically feasible and commercially viable, the project is still under development at year end. 

a) The company’s policy for depreciation is to use the straight-line method at the following rates: 

Plant &Machinery 10% 

Fixtures & Equipment 12½ % 

Motor Vehicles 20% 

b) The company charges a full year’s depreciation / amortisation in the year of acquisition of a non- current asset and no depreciation in the year of disposal. 

(i) Write a report to the directors of Omega Ltd outlining the treatment of each item above as per the relevant international accounting standard and prepare the Schedule of Property, plant and equipment movements and balances for the company’s published financial statements for the year ended 31st January 2021.