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ACCA Applied Skills · Financial Reporting

Tangible Non-Current Assets for ACCA Financial Reporting

Tangible non-current assets are physical assets held for use over more than one period. Under IFRS you measure them at cost, depreciate them over useful life, and then revalue, impair, dispose of, or reclassify them as held for sale. You solve questions by tracking the carrying amount step by step.

What this chapter covers

This chapter covers the life of a physical asset in the financial statements. It starts with what goes into cost, moves through depreciation and revaluation, and ends with disposal, impairment, grants, investment property and assets held for sale. The main standards are IAS 16, IAS 36, IAS 20, IAS 40 and IFRS 5.

The core skill is tracking the carrying amount. Almost every question asks you to find a cost, a depreciation charge, a gain or loss, or a closing balance. If you keep a clear working for cost, accumulated depreciation and any revaluation surplus, most calculations become routine.

This chapter connects to the rest of FR in several ways. The numbers feed the statement of financial position, the statement of profit or loss and the statement of cash flows, where depreciation is added back and disposal gains or losses are adjusted. The same assets appear in the preparation of single-entity and group statements. Leases, intangibles and inventories sit beside it, and you will often need to decide which standard applies.

Tangible non-current assets appear in every sitting, in all three sections. In Section A and Section B you get short calculations and rule-based questions that are marked all or nothing, so one slip in a depreciation or revaluation figure costs the full mark. In Section C the assets are often a large part of the financial statements you must prepare, and errors here carry through to profit and the balance sheet. The rules are logical and repeat from one exam to the next, so this is one of the most reliable places to earn marks for the effort you put in.

Tangible non-current assets: topics in the order to study them

  1. 1Initial Measurement of Property, Plant and EquipmentEverything else builds on cost, so you must know what to include and exclude first.
  2. 2Subsequent Expenditure and DepreciationDepreciation and the capital versus revenue split are needed to find carrying amount before any later change.
  3. 3Revaluation of Non-Current AssetsIt extends depreciation by changing the carrying amount and introduces the revaluation surplus.
  4. 4Disposal of Non-Current AssetsIt uses carrying amount at the date of sale, so it comes once depreciation and revaluation are secure.
  5. 5IAS 36 Impairment of AssetsIt tests carrying amount against recoverable amount and interacts with revaluation surpluses.
  6. 6IAS 20 Government GrantsIt is a smaller, self-contained topic that adjusts how asset cost and depreciation are presented.
  7. 7IAS 40 Investment PropertyIt is a different measurement model, so learn it after the standard PPE rules to compare the two.
  8. 8IFRS 5 Non-Current Assets Held for SaleIt changes measurement and presentation of assets, so it works best as the final step once all other rules are known.

How to prepare Tangible non-current assets

Build the chapter in layers. Learn the rule, practise the calculation, then practise the written explanation and the journal.

  1. Read through the topics in the study order and write a one-line rule for each in your own words.
  2. Practise the cost and depreciation workings until you can produce a full asset schedule without prompting.
  3. Do revaluation questions in a set layout: depreciate to the date, revalue, record the surplus, then charge later depreciation on the new amount.
  4. Practise disposals and impairments by always starting from the carrying amount at the relevant date.
  5. Do short objective-style questions on each topic under time pressure, and review every wrong answer for the exact rule you missed.
  6. Attempt full Section C style questions that include assets within financial statements, and check that your notes and statements agree.
  7. Revisit your error list one week before the exam and redo the questions you got wrong.

Common mistakes in Tangible non-current assets

  • Including costs in an asset that should be expensed, such as training or general overheads.

    Fix: Ask whether the cost is directly attributable to bringing the asset to its location and condition for use. If not, expense it.

  • Forgetting to charge depreciation up to the date of revaluation or disposal.

    Fix: Always bring depreciation up to date first, then revalue or compute the gain or loss.

  • Depreciating the revalued amount over the original remaining life without checking, or leaving depreciation on the old cost.

    Fix: After a revaluation, depreciate the new carrying amount over the remaining useful life.

  • Taking an impairment loss straight to profit or loss when a revaluation surplus exists for that asset.

    Fix: Treat the loss as a revaluation decrease first, against the surplus on that asset, and charge only the excess to profit or loss.

  • Applying the wrong measurement rule for investment property or held-for-sale assets, such as depreciating them.

    Fix: Check the classification first. Investment property under fair value and assets held for sale are not depreciated.

  • Mishandling grants by crediting the full amount to profit in the year received.

    Fix: Spread the grant over the asset's useful life, either through deferred income or by reducing the asset's carrying amount.

Last-day revision: Tangible non-current assets

  • Cost includes purchase price less trade discounts, import duties, non-refundable taxes, directly attributable costs and initial estimate of dismantling costs.
  • Do not capitalise general overheads, training or abnormal waste.
  • Subsequent expenditure is capitalised only if it improves the asset or replaces a component; repairs and maintenance go to profit or loss.
  • Depreciation = (cost − residual value) ÷ useful life for straight line; charge it from when the asset is available for use.
  • Change in estimated life or residual value is applied prospectively, not by restating prior years.
  • Under the revaluation model, increases go to other comprehensive income and the revaluation surplus unless reversing an earlier loss on the same asset in profit or loss.
  • Revalue whole classes of assets, not single items, and keep values up to date.
  • Disposal gain or loss = proceeds − carrying amount at disposal, taken to profit or loss.
  • Impairment loss arises when carrying amount exceeds recoverable amount, which is the higher of fair value less costs of disposal and value in use.
  • Under IAS 20, a grant related to an asset can be deducted from carrying amount or shown as deferred income; either way it is released over the asset's life.
  • Investment property may use the fair value model, with changes in value in profit or loss and no depreciation, or the cost model.
  • An asset held for sale is measured at the lower of carrying amount and fair value less costs to sell, and is no longer depreciated.

Tangible non-current assets practice questions

Tangible non-current assets in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Tangible non-current assets: frequently asked questions

How much of this chapter is tested in the ACCA FR exam?

Tangible non-current assets can appear in Section A, Section B cases and Section C. It is a core area, so expect it at every sitting. Treat the whole chapter as likely to appear.

Do I need to memorise journals for this chapter?

Yes, for the main entries such as acquisition, depreciation, revaluation, impairment, disposal and grants. Journals help you check that both sides of a transaction are right. They also support your Section C workings.

Is the revaluation model or the cost model more important?

You need both. The cost model is the base case, and the revaluation model is a common exam topic because of the surplus and the interaction with depreciation and impairment. Practise both until the workings are automatic.

How should I answer objective questions on this chapter?

Work out the carrying amount step by step and check the date for each event. Objective questions are marked all or nothing, so read the options carefully and avoid skipping any adjustment such as part-year depreciation.