Property_Plant_and_Equipment_SOP.v0.2.1.doc

此文檔收集于網(wǎng)絡(luò)，如有侵權(quán)，請(qǐng)聯(lián)系網(wǎng)站刪除Property, Plant and Equipmentand Investment PropertiesPolicy:Version:Pages:Issued:ACC-0110.2.110 pagesDRAFT on 12 October 2010Approval Authority:Author:Addressees:Chief Financial OfficerSenior Project manager - SOP DevelopmentExecutive Committee, Finance Managers, Accounting Staff with Fixed Asset ResponsibilitiesContentsParagraphs Purpose and Scope.1-4 Valuation of Property Plant and Equipmento Policy.5o Cost.6o Depreciation.7o Impairment Loss.8 Valuation of Investment Properties.9-12 Assets to be Disposed Of.13-15 Disposal.16 Inter-Company Transfer.17 Fixed Asset Register.18-21 Master List of Freehold and Leasehold Land and Buildings.22-24 Appendiceso Appendix 1 - Frequently Asked Questionso Appendix 2 - Related Hong Kong Financial Reporting StandardsPurpose and Scope1. Purpose - This standard operating procedure sets out the accounting treatment of property, plant and equipment, held-for-sale assets, investment property, and related internal controls.2. Related Documents - This SOP should be read in conjunction with ACC004 - Capital Expenditure, Disposals, and Major Projects3. Applicability - This SOP applies to entities within the JE Group, as follows Wholly owned - The SOP will be applied in full Majority owned - The SOP should be applied but it will also be necessary to consider the views of minority investors Associates and joint ventures - We should use our best endeavours to implement the SOP where we can4. Out of Scope - This SOP does not apply to the following: Investments in corporate entities Intangible fixed assets and R&D Projects Items costing below US$2,000. These items should be expensed within the income statement immediatelyValuation of Property, Plant and Equipment 5. Policy - Property, plant and equipment (other than investment properties) is stated at cost less accumulated depreciation and accumulated impairment losses. 6. Cost - Assets are recorded at cost at the time of acquisition or construction (See ACC004 - Capital Expenditure, Disposals, and Major Projects for details of the approval process for capital expenditure).a. Expenditure - The treatment of asset related expenditures is set out in the table below:Capitalized as Part of Asset CostTaken to the Income Statement When IncurredPurchase/ construction costsPurchase price, construction costs (materials, labour, direct overhead costs), non-refundable taxes or duties charged on the acquisition, brokers commissionsIndirect overheads (unless directly involved in bringing the asset to working condition)Set-up costsFreight costs for moving the asset, site preparation and installation, costs of testing that the asset is working properlyStaff training, initial operating losses while demand developsBorrowing costsBorrowing costs (e.g. interest on loans, finance lease charges, etc.) of funds Where the asset is funded out of general borrowings, the borrowing costs to be capitalized for the construction period will be proportional to weighted average borrowing cost for the amount of funding applied to the asset. used to finance the assets construction, incurred during the period of the assets construction and preparation for useBorrowing costs (e.g. interest) incurred after substantially all activities necessary to prepare the asset for use are completeImprovementsCosts incurred to make permanent improvements to the existing asset by increasing capacity, improving output quality, or reducing cost of manufactureRepairs and maintenanceMaintenance and refurbishment which extends the useful life of the asset. This should be capitalized and depreciated over the new life of the assetReplacement parts and servicing, routine repairs and maintenance b. Contribution - The treatment of government grants or customer contributions towards cost is shown below: Where capital expenditure attracts a government grant, the asset should be recorded at its gross cost. The grant should be recorded as a negative asset (i.e. reducing the carrying value of assets) and recognized as other revenue on a straight-line basis over the estimated useful life of the asset. If JE will retain ownership of the asset, the asset should be recorded at its gross cost. The customer contribution should be recorded as deferred revenue and recognized as revenue on a straight-line basis over the estimated useful life of the asset. If the customer will take ownership of the asset, the asset should be recorded in the fixed asset register at $nil cost. Any surplus or shortfall in contribution should be taken to revenue as tools produced in the same period that the asset is entered on the register.7. Depreciation - Depreciation is the systematic allocation of the cost of an asset, less its estimated residual value Residual value - Estimated amount expected to be obtained on disposal of the asset at the end of its useful life, less estimated costs of disposal, to the Income Statement as a non-cash expense over the estimated useful life of the asset. Depreciation should be calculated using the straight-line method. a. We estimate the useful life of each asset (how long we will use it), and its likely residual value at the end of its life, when we first record the asset in the fixed asset register. Typically, we would estimate the useful life within the following ranges: Assets under constructionNot depreciated Freehold landNot depreciated Buildings on freehold land25 to 50 years Buildings on leasehold landThe unexpired term of the lease Plant and machinery, equipment and tools, moulds2 to 15 years Furniture and fixtures, motor vehicles, computers3 to 10 yearsb. If an asset includes separately identifiable significant components with a different useful life to the asset itself, these components should be separately recorded and depreciated. c. Estimated residual values and useful lives of assets should be reviewed regularly (at least annually) and adjusted if appropriate. Any change in estimate should change the rate of depreciation to be charged in future periods but should not change any depreciation already charged. 8. Impairment Loss - If the assets net book value is greater than its recoverable amount Recoverable amount - The greater of (1) the amount that could be realised from the sale of an asset at arms-length, less costs of disposal and, (2) the net present value of the cash flows from the assets continuing use the resulting impairment loss is taken to the Income Statement immediately.a. Managers responsible for assets, or groups of assets, should annually review fixed asset lists and consider if any of the following signs of potential impairment exist (i.e. the asset is no longer as useful as originally expected): Significant technological, market or economic changes Loss of customer, or significant reduction in future demand Obsolescence Physical damage which is not economic to repair Decision to remove asset from use or to discontinue the productb. If there is possible impairment, Finance should calculate the recoverable amount and compare this to the net book value of the asset to determine if there is an actual impairment. The impairment loss should be recognized immediately, and recorded in the fixed asset register. Future monthly depreciation charges for the asset will be based on the impaired value.c. If there is a subsequent change to the circumstances that caused the impairment (e.g. lost customer comes back to us, new market for product, etc) then the impairment loss may be partially reversed. Finance should calculate the new recoverable amount and compare it to the net book value of the impaired asset. If the new recoverable value is higher than the net book value, then Finance should calculate the current depreciated value if the impairment had not been recognized (i.e. if depreciation had continued based on the original value). The reversal of the impairment is limited to the lower of the amount that would bring the value of the asset to this current depreciated value, or the new recoverable value.Valuation of Investment Properties9. Investment property Investment property - Property held for long term rental yields or for capital appreciation or both, and not occupied by companies within the JE Group is initially measured at cost, including related transaction costs. For each year-end we should obtain external guidance on the fair value of the investment asset. This should be based on active market prices, adjusted if necessary for any difference in the nature, location or condition of the specific asset. Any change in fair value is recognised in the income statement as valuation gain or loss.10. Land held under an operating lease is classified as investment property if the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.11. Subsequent expenditure is charged to the assets carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. At the next valuation, the carrying value should be adjusted to fair value and any changes in value recognised in the income statement as valuation gain or loss. All other repairs and maintenance costs are expensed when incurred.12. If an item of property becomes an investment property because its use has changed, any difference resulting between the net book value and the fair value of the property at the date of transfer is recognised in equity as a revaluation of property, plant and equipment under HKAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement. Subsequent changes in fair value will be treated as changes of value in an investment property.Assets to be Disposed Of13. Where we decide to sell an asset, or a group of assets, these are reclassified as “held-for-sale” (see ACC004 - Capital Expenditure, Disposals, and Major Projects for the approval process for disposal of assets). The criteria for reclassification of property, plant and equipment as “held-for-sale are: The carrying value of the asset will be recovered mainly through its sale rather than through continued use The asset is available for immediate sale, in its present condition The sale must be highly probableo We must commit to a plan to sell and this plan is unlikely to change or be withdrawno We must be actively seeking a buyero It is probable that we will be able to sell the asset within one yearo The asking price must be reasonable in relation to the assets fair value14. Assets held-for-sale are not depreciated. Instead they are measured at the lower of carrying value or fair value less any expected selling costs. Any impairment loss is taken to the Income Statement immediately. If the intention is to sell assets in a single transaction, the disposal group is measured as a whole. If we intend to sell a newly acquired asset (e.g. bought as part of a larger transaction such as purchase of a business), and we expect to sell it within one year, the asset will be measured at fair value less any expected selling costs. If the sale is expected to take place more than a year after acquisition, the asset should be measured at the present value of this fair value. Repairs and maintenance, or other costs associated with the asset are recognized as expenses and charged to the Income Statement as incurred.15. If we subsequently decide not to sell a held-for-sale asset, the asset is reclassified as an operating asset. On reclassification, we measure the asset at the lower of its recoverable value, and its carrying value immediately prior to being classified as held-for-sale, adjusted for the depreciation that would have been charged to date if the asset had continued to be treated as an operating asset.Disposal16. The gain or loss on disposal of any asset should be calculated as sale proceeds, less net book value and recognised in the Income Statement in the period in which disposal occurred.Inter-Company Transfer17. For group reporting purposes, if assets are transferred from one Group company to another, the complete fixed asset register entry should be transferred from the selling company to the buying company so that the historic cost and accumulated depreciation do not change.Fixed Asset Register18. Each item of property, plant and equipment should be given a unique asset number. This number should be recorded in the fixed asset register and marked on the asset itself (e.g. ID tag, stencil, stamping, etc). When labelling or marking is impractical because of the size or the sensitive nature of the item, the site should keep photographs of the object and a description together with any unique identification information (serial number, makers mark, etc)19. Each legal entity holding property, plant and equipment should keep a fixed asset register. This should list each asset and identify its asset number, its location, its cost, estimated life, accumulated depreciation, the business unit/cost centre to be charged with depreciation, and any impairment losses. The fixed asset register should be kept up-to-date, with all changes being recorded in the correct accounting period.20. Finance should reconcile the fixed asset register to the general ledger fixed asset related accounts, monthly. Any differences found should be promptly investigated and resolved. 21. The accuracy of the fixed asset register should be confirmed by: Annual review and sign-off of asset lists by operational managers on an annual basis Physical verification of fixed assets at least once every three years. This may be done on a rolling basis or in one exercise. Master List of Freehold and Leasehold Land and Buildings22. Each region will maintain a master list of freehold and leasehold land and buildings. This will identify Property address Property typeo Freehold/leasehold (including remaining term of lease)o Factory/office/residential Contact information for member of staff responsible for property Usage - Held for operational use/investment property/held-for-sale Location and holder of title deeds Carrying value/Fair value Date of any external valuation Contact details for valuer23. The Regional Head of Finance will ensure that we obtain an external valuation for any property with indicators of impairment, and annually for investment property and held-for-sale property. Valuations will be validated at regional level to identify any odd valuations, and clarify the valuers assumptions.24. For the half-year and year-end close, the master list will be sent to the Group Consolidation Team, together with details of any revaluation gain or loss, or impairmentAppendix 1 - Frequently Asked Questions 1. ACC004 - Capital Expenditure, Disposals, and Major Projects does not consider items with a gross cost of less than $2,000 to be capital expenditures. My fixed asset register includes items purchased before this SOP was issued, but which cost less than $2,000. What should I do with these items?Answer -Assets capitalized before the CAPEX SOP was issued and with an original purchase cost below US $2,000 should continue to be recorded in the fixed asset register and depreciated over their remaining estimated useful lives.2. Under local accounting rules I must capitalize all assets costing more than $150 and then depreciate them using the reducing balance method. This gives me differences between my local GAAP and HKFRS. Can I simplify this by using the local rules for capitalization and subsequent depreciation when I report to Group? Answer - The monthly results submitted to Group should conform to Group requirements. Where local tax or accounting rules require different capitalization levels or depreciation methods from Group policy, accounting staff responsible for local reporting should ensure that they keep sufficient information to be able to adjust the entitys results for local statutory/tax reporting purposes, and should reconcile group and local reporting. This reconciliation and the justification for any adjustments should be available for review by the Regional Head of Finance and by the auditors.3. Should I expense small items below $2,000 within the depreciation line?Answer -No. these small items should be charged to an appropriate non-depreciation line. This will ensure that depreciation charge in the P&L relates only to depreciation movements for assets shown on the balance sheet. 4. My operating unit is constructing an asset costing $90,000. We will receive a cash contribution from the customer of $100,000. The asset will have a useful life of 5 years and we will use it to provide goods to the customer over a period of 5 years. What are the journal entries for this?Answer - the following journal entries are required:When the asset is constructedDrCrProperty, Plant and Equipment90,000Cash90,000To account for the construction of the assetCash