Question

In: Accounting

For the purposes of recognising property, plant and equipment assets the acquisition date is the date:...

For the purposes of recognising property, plant and equipment assets the acquisition date is the date:

the contract to exchange assets is signed.

on which the acquirer obtains control of the asset.

on which the contract to acquire the asset becomes unconditional.

the consideration is paid.

The cost of property, plant and equipment is only recognised if the cost of the asset can be reliably measured and:

the cost is not directly attributable to the asset.

the asset has been paid for in cash.

the asset has been received by the purchaser.

it is probable that future economic benefits associated with the asset will flow to the entity.

Solutions

Expert Solution

Answer is second option – on which the acquirer obtains control of the asset

The acquisition date is the date on which the property, plant and equipment should be recognised in books of account. The acquisition date is the date when the acquirer or buyer gets the control of the asset. The other dates given in the question – contract signing date, unconditional contract and consideration paid date is not relevant for recognising the PPE in the books of buyer. The control over the asset is the ultimate test for recognition of PPE in books

Answer is fourth option-it is probable that future economic benefits associated with the asset will flow to the entity

Assets are acquired by the firm with a long term intention. Hence assets should be recognised only when the future economic benefits associated with the asset will flow to the entity. For example: the asset should help the firm in generation of revenue. The other answer options needed not be there for asset cost to be recognised in the books of the buyer.


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