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Casestudy - Case Study Example

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IAS 16 Property Plant and Equipment Name Instructor IAS 16 Property Plant and Equipment IAS 16 Property, Plant and Equipment provides the general outline of the numerous accounting treatments to be applied to most types of property, plant and equipment. Initially, Property, plant and equipment were measured at its initial cost but has consequently with time changed it being measured using a cost revaluation model and depreciated with the depreciated amount being allocated systematically over its useful life (International Accounting Standards Board, 2006)…
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IAS 16 requires that the recognition principle is applied to all property, plant and equipment costs only at their occurrence. Amongst other things, the costs include the initial costs incurred for either the acquisition or the construction of an item of property plant and equipment and the subsequent costs that are incurred for replacement of parts or service. There exists two types of accounting models under IAS 16. These include the cost model and the revaluation model (International Accounting Standards Board, 2006). While the cost model requires that assets are assessed at costs that are less than the accumulated depreciation and the impairment, the revaluation model requires that the assets be recorded at a revaluated amount hence making its fair value at the date of revaluation less the subsequent depreciation and impairment only with provisions that the fair value can be measured with much reliability. The company that we will be taking into consideration is ING Group N.V., a global financial services firm that is based in the Netherlands (ING Group, 2012). The company applies critical accounting policies that the management believes are not only important to the portrayal of the organizations financial condition and results, but that is also require the most difficult, subjective and complex judgement mainly resulting from the need to make estimations about the various effects of matter and that are also inherently uncertain. Key to note is the fact that various judgements and uncertainties that affect the application of the policies which may result reporting of different amounts that are significantly material under the various different conditions or through the use of different assumptions. The company considers financial reporting and disclosure practice and employs the use of accounting policies quarterly in a bid to ensure there is not only accuracy in the reported information that is not only relative to the prevailing economic conditions, but also the business environment. The company’s property, plant and equipment are reported at a cost that is less the accumulated depreciation. The depreciation realized on property, plant and equipment including even the assets under capital is computed on the straight line method over the estimated useful lives which in most cases range between 30 to 40 years in the case of buildings and 2 to 15 years in the case for equipment (ING Group, 2012). The company immortalizes leasehold improvements over the shorter of the leaseholds estimated useful lives or the related lease life that is mostly not less than 10 years. In the instances where the leases have the options of renewable periods, the company employs the use of original lease term that excludes renewal option periods aimed at determining the estimated useful lives. In instances where a failure to exercise a renewal option results into imposition of an economic penalty to the company, the company may determine at the inception of the lease about its renewal being reasonably assured and may include the inclusion of the renewal option period in the determination of the various appropriate estimated useful ... Read More
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