IAS 16 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
- Case studies
- Workpapers
- Exams
Initial recognition and cost of acquisition
Acquisition of a machining centre
Section 1 of 9
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IAS 16 workpaper
- Level
- Foundation
- Estimated time
- ≈ 60 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Fonderie Valmont (a fictitious company) manufactures mechanical parts and its reporting date is 31 December. It applies the cost model to its property, plant and equipment. In 20X1 it acquires a computer-controlled machining centre to increase its production capacity. You are asked to account for the acquisition using the documents in the file below.
Assignment
'Initial recognition and cost' workpaper: recognition criteria and calculation of the initial cost.
Purpose of the workpaper
Document the initial recognition of an item of property, plant and equipment: enter the invoice and contract data, qualify the item and its unit of account, determine the initial cost (net purchase price and directly attributable costs), complete the dismantling, deferred payment or exchange sections when they apply, then conclude and record the entries. Every amount is linked to supporting evidence.
Questions of the file covered by this workpaper
- Does the machine meet the definition of property, plant and equipment and the recognition criteria? On what basis is it measured initially?
- Determine the initial cost of the machine and the total expenditure to be recognised as an expense.
Documents in the file
Open the documents to pick out the relevant information.