Question

You are the controller of a company that has just switched to IFRS. For the area of PP&E you have asked the programmer for the PP&E system to include a routine that forces users to re-enter information each year. For which field would it be appropriate to include in this routine.

a. Residual value

b. Asset name

c. Cost

d. Date placed in service

Answer 1

Based on the information available in the question, the correct answer is Option A - Residual Value. Residual Value is the amount that a company expects to recover after completing the useful life of the asset. Salvage/Residual value is bound to change periodically based on the wear and tear of the asset, economical conditions, etc. As such, Salvage / residual value is constantly evaluated to ascertain the reasonableness of the value determined. Hence, it would be helpful if the routine forces users to re-enter the Residual Value information each year based on the current conditions.

Option B is incorrect. Asset name would remain constant over the life of the asset. It would not require any changes to be made and hence this option is incorrect.

Option C is incorrect. The cost of the asset would remain same year over year. Hence, this would not be a field that would require users to re-enter the values.

Option D is incorrect. Date placed in service can be only one date and would not change year over year. Hence, this is not the valid answer.

Please let me know if you have any questions via comments and all the best :) !