Announcement of The Federation of Accounting Profession on PPE and Investment property

The Federation of Accounting Professions announced on additional requirements for financial reporting standards for non-public entities regarding property, plant and equipment and investment property.

This announcement shall comply with the financial statements the accounting period Commencing on or after January 1, 2020 onwards.

(When this announcement is gazetted, it will come into effect.)

 

1. The entity may choose to adopt an accounting policy from following 2 models for Measurement after recognition of Property, Plant and Equipment. But, the same accounting policies must be applied for all property, plant and equipment of the same accounts.

 

(1) Cost model

After recognition as an asset, an item of property, plant and equipment shall be carried at its cost less any accumulated depreciation and any allowance for diminution in value (if any).

-> TFRS for NPAEs Chapter 10 Property, Plant and Equipment Item 134

 

(2) Revaluation model

After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

 

If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss.

 

If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.

[⇒see FAP example: Example1, Example2, Example3, Example4]

 

The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed.

However, some of the surplus may be transferred as the asset is used by an entity. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost. Transfers from revaluation surplus to retained earnings are not made through profit or loss.

[⇒see FAP example: Example5, Example6, Example7]

 

2. The entity may choose to adopt an accounting policy from following 2 models for Measurement after recognition of investment property. But, entity must apply the same accounting policies for all of its investment properties.

 

(1) Cost model

After recognition as an asset, an investment property shall be measured by using the cost model. It shall be carried at its cost less any accumulated depreciation and allowance for diminution in value (if any).

-> TFRS for NPAEs Chapter 12 Investment property Item 212

 

(2) Fair value model

After initial recognition, an entity that chooses the fair value model shall measure all of its investment property at fair value.

A gain or loss arising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which it arises.

[⇒see FAP example: Example8]

 

 

 

Transfer from investment property to owneroccupied property

An entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use.

For a transfer from investment property carried at fair value at the date of change in use.

[⇒see FAP example: Example9, Example10, Example11, Example12]

 

Disposal

An investment property shall be derecognised (eliminated from the statement of financial position) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal.

Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless TFRS 16 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.

 

 

FAP examples ->  https://www.tfac.or.th/upload/9414/5YnH8XYCeS.PDF

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