Summary of "ACCA SBR Revisions - PART 1 | Full Syllabus | LATEST Revisions | CA Vishal Jain"

Summary of ACCA SBR Revisions - PART 1

1. Property, Plant and Equipment (PPE) - IAS 16

Definition & Scope:
- PPE are tangible non-current assets held for use in production, supply, rental to others (excluding Investment Property), or administrative purposes.
- Difference between PPE and Investment Property (IAS 40):
  - Property held for rental to others = Investment Property.
  - Equipment held for rental to others = PPE.
- Assets held for sale in ordinary course = Inventory.
- Assets held for sale but not in ordinary course = Non-current assets held for sale (IFRS 5).
- Biological assets with characteristics of PPE (Bearer Plants) fall under IAS 16; others under IAS 41.
Bearer Plants:
- Living plants that provide economic benefits over their life (e.g., mango trees).
- Accounted as PPE.
Recognition Principle:
- Recognize PPE only if:
  - Probable future economic benefits flow to entity.
  - Cost can be measured reliably.
- Otherwise, expense cost to P&L.
Measurement Principle:
- Initial measurement at cost, including:
  - Purchase price minus trade discounts (cash discounts go to P&L).
  - Non-refundable taxes.
  - Borrowing Costs during construction (capitalized as per IAS 23).
  - Directly attributable costs (employee costs, site prep, installation, testing).
  - Present value of decommissioning, dismantling, restoration costs (DRRC provision).
- Testing costs capitalized; proceeds from sale of output during testing go to P&L.
- General overheads, staff training, initial operating losses, advertising costs are expensed.
Decommissioning Provision Accounting:
- Capitalize present value of estimated future costs.
- Unwind provision over time, recording finance cost in P&L.
- Adjust for actual costs paid and differences recognized in P&L.
Subsequent Measurement:
- Two models:
  - Cost model: Carrying amount = cost - accumulated depreciation - impairment.
  - Revaluation model: Carrying amount = fair value - accumulated depreciation - impairment.
- Revaluation must be done on a class of assets basis.
- Revaluation frequency: When carrying amount materially differs from fair value, generally every 3-5 years.
- Revaluation gains go to OCI and revaluation reserve; losses first reduce revaluation reserve then P&L.
- Revaluation gains/losses accounted on an asset-by-asset basis (no netting).
Revaluation Reserve:
- Transferred to retained earnings on derecognition or systematically over the asset’s life via excess depreciation.
- Default treatment is full transfer on derecognition unless otherwise specified.
Component Accounting:
- Significant parts with different useful lives depreciated separately.
- Replacement of components derecognized and new component capitalized.
Derecognition:
- When asset is sold, discarded, or no longer provides economic benefits.
- Gains or losses recognized in P&L.
- Sale proceeds from PPE not recognized as revenue (not ordinary course of business).
Special Cases:
- Self-constructed assets: Abnormal waste expensed; normal waste capitalized.
- PPE acquired in exchange: Recognized at fair value of asset given up or received.
- Safety/environmental equipment (enablers) capitalized.
- Spare parts classified as PPE or inventory based on nature.
Depreciation:
- Starts when asset is available for use.
- Methods: Straight line, reducing balance, machine hour rate.
- Residual value and useful life reviewed annually.
- Depreciation continues even if asset is idle or classified as held for sale.

2. Investment Property - IAS 40

Property (land/building or part) held for rental to others or capital appreciation.
Classified separately from PPE.
Recognition criteria same as PPE.
Measurement:
- Cost or fair value model (entire Investment Property is one class).
- Revaluation gains/losses recognized in P&L (unlike PPE where it goes to OCI).
- Fair value disclosure mandatory.
Transfers between PPE and Investment Property:
- At date of transfer, follow old classification rules.
- Subsequent measurement follows new classification.
- Transfers at carrying amount or fair value depending on models.
- Revaluation gains/losses treated according to old classification.