CHAPTER 2
TANGIBLE NON-CURRENT ASSETS
 IAS-16 PROPERTY, PLANT & EQUIPMENT
 All the costs that should be included in the initial measurement of an asset are:
1. Bring asset to working condition
2. Site Preparation, Delivery Costs, Installation Costs, Borrowing Costs
3. Dismantling Costs
 Subsequent Expenditure
1. Capital Expenditure
Which will increase
- Existing useful life
- Existing performance
2. Revenue Expenditure
Which will maintain
- Existing performance
- Repairs, Maintenance
 Revaluation of Non-Current Assets
1. Cost Model
= Cost less accumulated depreciation.
2. Revaluation Model
= Revalued amount less any subsequent accumulated depreciation .
= Surplus is recorded in SOCIE whilst loss is recorded in SOPL.
= Revaluation gain is added in other comprehensive income whilst loss is
recorded in SOPL

Upward Revaluation
An asset was revalued upward from 1000 to 1200.
Dr
NCA
200
Cr
R.S
200
Downward Revaluation
An asset was revalued downward from 1000 to 800.
Dr R.D
200
Cr
NCA
200

Upward and Upward Revaluation
An asset was revalued upward from 1000 to 1200 and then to 1400.
Same as first entry.

Downward and Downward Revaluation
An asset was revalued downward from 1000 to 800 and then to 600.
Same as second entry.

Upward and Downward Revaluation
An asset was revalued upward from 1000 to 1200 and then to 900.
Dr R.D
100
Dr R.S
200
Cr
NCA
300

Downward and Upward Revaluation
An asset was revalued downward from 1000 to 800 and then to 1100.
Dr
NCA
300
Cr
R.D
200
Cr
R.S
100
 IAS-20 GOVERNEMENT GRANTS
1. REVENUE GRANTS
The costs are 200,000 and govt. grants are 100,000. The rest of the amount is to be
paid by the company.
SOCIE OPTION 1
SOCIE OPTION 2
Staff costs
(200,000)
Govt. Grants
100,000
Net amount
(100,000)
Staff costs
(100,000)
2. CAPITAL GRANTS
These are related to the purchase of non-current assets.
An asset is bought for 100,000 with useful life of 5 years. Govt. grant is 50,000 for 5
years.
OPTION 1
SOCI
SOFP
Depreciation
(10000)
NCA
50000
DEP
(10000)
NBV
40000
OPTION 2
SOCI
Depreciation
Govt. Grants
(20000)
10000
(10000)
SOFP
NCA
DEP
NBV
NCL
G.G
Amm
100000
(20000)
80000
50000
(10000)
40000
 IAS-23 BORROWING COST
If a company takes out a loan for the purpose of financing the acquisition of a qualifying
asset, that is known as borrowing cost. These should be capitalized with the cost of
assets in SOFP.
A qualifying asset is an asset which takes substantial time period to get ready for its
intended use or sale.
 Commencement of Capitalization
1. When activities on the assets or on qualifying assets has been started.
2. Borrowing costs has been started. Loan taken and approved.
3. Investment on the qualifying asset has been done.
All the above 3 conditions should be met in order to treat it as a borrowing cost else
won’t be classified as borrowing costs. Before this we will expense out.

EXAMPLE NO.1
Loan taken and asset taken on the same date as 1st Jan. Now in SOFP the qualifying
asset value is 100,000 and interest is 10%.
SOFP = 100,000 + 10,000 = 110,000
SOCIE = Finance Cost = 0

EXAMPLE NO.2
The asset became qualifying on 1st April and at a value of 100,000. Loan was arranged
on 1st Jan @ 10%. The Co. invested 80,000 for 6 months @ 8% interest.
SOFP
Qualifying asset
+ Borrowing Cost [10000*(9/12)]
-Temporary Income [80000*8%*(3/12)]
Asset Value
100,000
7500
(1600)
105900
SOPL
Finance Costs [10000*(3/12)]
-Temporary Income
SOCIE
2500
(1600)
900
 Cessation of Assets
All activities necessary to prepare the qualifying asset for its intended use or sale are
complete or construction has been suspended.

EXAMPLE NO.1
An asset costing 100,000 became qualifying on 1st Jan and loan was arranged on 1st
Jan. Loan Interest is 10%. Asset was ceased for two months of August and September
and completed in November.
For the months, construction didn’t occur, they will be treated as finance costs.
For 3 months = 100,000 × 10% × 3/12 = 2500
Add: Depreciation (Useful life 5 years) = 100,000/5 = 2500
 Types of Borrowing
1. Specific
For e.g = 9.5% @ 850,000
2. General
There is no concept of temporary income under general borrowings.
100,000
10%
1st Jan
200,000
12%
1st April
300,000
14%
1st July
(100,000*10%*(12/12)) + (200,000*12%*(9/12)) + (300,000*14%*(6/12))
(100,000*(12/12) + (200,000*(9/12)) + (300,000*(6/12))
The rate is equals to 12.25%
 IAS-40 INVESTMENT PROPERTY
It is applied on:
1. Investment properties held for capital appreciation
2. Rental purposes (whole property is declared for rental purposes)
- In IAS-16, there is historical cost model and revaluation model.
- In IAS-40, there is cost model and fair value model.
- In cost model, depreciation is charged but in fair value model, it is not charged.