Question bank — IAS 16 — Property, Plant and Equipment

50 questions in FR/EN/ES, scored by the real scoring engine.

Objective of the standard1 question

True or false? IAS 16 sets out, among other things, when an item of property, plant and equipment is recognised, what carrying amount it is given and which depreciation charges and impairment losses are recognised.True / falseL1

General scope1 question

A property development company holds the following items. Which one falls within the scope of IAS 16?Single choiceL1

Scope exclusions1 question

Which of the following are excluded from the scope of IAS 16? (Select all that apply.)Multiple choiceL1

Definition of property, plant and equipment2 questions

Measurement definitions1 question

An item of equipment has a cost of …. At the reporting date, accumulated depreciation amounts to … and accumulated impairment losses to …. Its residual value is estimated at …. Calculate its carrying amount at the reporting date and its depreciable amount.CalculationL2

Recognition criteria2 questions

Spare parts, stand-by and servicing equipment1 question

A power plant operator buys a spare turbine, kept on stand-by to quickly replace the main turbine in case of breakdown. Once installed, it would be used over several periods. It also buys seals and filters consumed during monthly servicing. Which classification is correct?Single choiceL3

Day-to-day servicing1 question

While reviewing an industrial entity's property, plant and equipment additions for the year, you note the capitalised expenditure below. Which item should have been recognised as an expense?Single choiceL2

Replacement of parts1 question

The inner lining of an industrial furnace is a separately depreciated component. It is replaced before the end of its useful life; the new lining costs …, paid in cash, and meets the recognition criteria. The old lining had a cost of … and accumulated depreciation of …; it is scrapped with no salvage value. Record the entry.Journal entryL3

Measurement at cost on initial recognition1 question

True or false? An item of property, plant and equipment that qualifies for recognition is initially measured at its fair value at the acquisition date.True / falseL1

Purchase price2 questions

Directly attributable costs3 questions

Costs excluded from the cost of an item1 question

A restaurant chain opens a new site. Which of the following expenditures must be recognised as expenses rather than included in the cost of the site's property, plant and equipment? (Select all that apply.)Multiple choiceL2

Cessation of capitalisation1 question

A machine is installed and capable of operating as intended on 1 March, but production only starts on 1 May for lack of orders. The entity then incurs: 6,000 of costs during the idle period in March–April; 9,000 of initial operating losses in May while demand builds up; 4,000 to move the machine to another hall in June. What amount should be added to the cost of the machine?Single choiceL3

Proceeds before intended use1 question

While bringing a new production line to working condition, an entity incurs … of costs of testing whether the line functions properly, already included in its cost. The tests produce samples whose cost, measured under IAS 2, is … and was recognised as inventories. The entity sells the samples for … in cash before the line is available for use. Record the entry for the sale of the samples.Journal entryL4

Incidental operations1 question

While waiting for construction of its future warehouse to begin, an entity rents out the bare site as a car park for six months. It collects receipts and incurs security costs. How should this income and these expenses be accounted for?Single choiceL2

Choice of cost or revaluation model by class1 question

After initial recognition, how does an entity measure its property, plant and equipment under IAS 16?Single choiceL1

Cost model1 question

Under the cost model, at what amount is an item of property, plant and equipment carried after initial recognition?Single choiceL1

Conditions of the revaluation model1 question

True or false? Under the revaluation model, a building revalued to its fair value continues to be depreciated after the revaluation date.True / falseL2

Fair value measurement for revaluation1 question

An entity applies the revaluation model to its land and buildings. Under which standard is the fair value used for the revaluation determined?Single choiceL3

Revaluation of an entire class1 question

An entity wants to apply the revaluation model. Which groupings are classes of property, plant and equipment as defined in IAS 16? (Select all that apply.)Multiple choiceL2

Revaluation increases1 question

An entity applies the revaluation model to its land. A plot acquired for 300,000 was revalued to 270,000 in 20X1; the 30,000 decrease was recognised in profit or loss because there was no revaluation surplus. In 20X3, its fair value reaches 320,000. How is the 50,000 increase recognised in 20X3?Single choiceL4

Revaluation decreases1 question

An entity applies the revaluation model to the class 'land'. A plot of land is carried at … and its own revaluation surplus amounts to …. At the new revaluation date, its fair value is …. Record the revaluation entries.Journal entryL3

Component approach2 questions

Recognition of the depreciation charge1 question

The depreciation charge for a machine used exclusively to manufacture finished goods held for sale should be:Single choiceL2

Depreciable amount and depreciation period1 question

True or false? When the fair value of a warehouse rises above its carrying amount, the entity may suspend depreciation for as long as this situation lasts, even though its residual value remains below its carrying amount.True / falseL2

Residual value1 question

A haulage company plans to sell its trucks at the end of their five-year useful life. Today, a five-year-old truck in the expected condition sells on the second-hand market for about 30,000; disposal costs would be 2,000. A consultant forecasts that, owing to inflation, this truck will sell for 36,000 in five years. What residual value should be used?Single choiceL2

Useful life2 questions

Land and buildings1 question

True or false? When an entity acquires land together with the building on it, it accounts for them as two separate assets and, as a general rule, does not depreciate the land.True / falseL1

Depreciation methods1 question

A site vehicle costing … is depreciated using the diminishing balance method at a rate of …, applied to the carrying amount at the start of each year. It is available for use from the first day of the first year. What is the depreciation charge for the second year?CalculationL2

Start of depreciation1 question

An entity's reporting date is 31 December. On 15 February 20X1 it receives the invoice for a machine costing …, pays it on 31 May and starts production on 1 June. The machine is installed and available for use as intended from 1 April. Useful life: …; residual value nil; straight-line method, time-apportioned. What is the depreciation charge for 20X1?CalculationL1

Cessation of depreciation1 question

True or false? A bottling line depreciated on a straight-line basis, shut down for three months because of a temporary drop in demand, stops being depreciated during the shutdown and resumes depreciation when it restarts.True / falseL3

Review of useful life, residual value and method1 question

A machine costing …, with no residual value, is depreciated on a straight-line basis over …. At the start of the fifth year, after … of use, a technical review concludes that the machine will only be usable for a further …. What annual charge should be recognised from this year onwards?CalculationL3

Impairment by reference to IAS 361 question

At the reporting date, an entity notes the following facts about an industrial press measured under the cost model. Which one requires IAS 36 to be applied to determine whether the press is impaired?Single choiceL3

Compensation from third parties1 question

An entity's reporting date is 31 December 20X1. In October 20X1, a fire destroys a warehouse with a carrying amount of 40,000. On 10 December 20X1, the insurer agrees in writing to pay compensation of 55,000, paid in January 20X2. A replacement warehouse will be built in 20X2. What treatment applies in the 20X1 financial statements?Single choiceL3

Derecognition triggers1 question

True or false? A machine that is permanently out of service, from which the entity expects no future economic benefits from either its use or its disposal, must be derecognised even though it has not been sold or physically scrapped.True / falseL2

Gain or loss on derecognition3 questions

Date of disposal1 question

An entity signs a contract to sell a machine on 15 November. The buyer pays a deposit on 30 November, takes possession of the machine, assumes its risks and starts using it on 10 January, the date on which it obtains control. What is the date of disposal of the machine?Single choiceL2

Disclosures by class: bases, methods, lives1 question

For each class of property, plant and equipment, which information must the financial statements disclose? (Select all that apply.)Multiple choiceL2

Carrying amount reconciliation1 question

The carrying amount reconciliation prepared for the notes shows: opening 800,000; additions 150,000; depreciation for the year (90,000); disposals (70,000); closing 790,000. The statement of financial position shows a closing carrying amount of 835,000. The assets disposed of had a cost of 70,000 and accumulated depreciation of 45,000. What causes the difference?Single choiceL4

Impairment disclosures1 question

True or false? For impaired property, plant and equipment, the entity discloses the impairment information required by IAS 36, in addition to the movements shown in the carrying amount reconciliation required by IAS 16.True / falseL3