Non-current assets - part 1

In this lesson

1. 0:00 Property, plant and equipment recap
2. 0:20 Capitalising versus expensing PPE costs
3. 1:28 Cost and revaluation models explained
4. 2:08 Depreciation methods and useful lives
5. 3:40 Auditing non-current asset procedures
6. 5:13 Depreciation testing and disposal audits
7. 6:27 Rights, obligations and ownership confirmation
8. 7:47 Completeness and existence testing
9. 9:00 Intangible assets recognition criteria
10. 10:27 Auditing development expenditure and intangibles

About this lesson

This video covers the key distinction between capitalising expenditure that enhances economic benefit and expensing repairs or maintenance, alongside the two valuation models available: cost and revaluation. You'll also explore depreciation and amortisation methods, the audit procedures required to verify non-current assets, and the specific criteria for recognising intangible assets like development expenditure. This foundational knowledge is essential for Financial Accounting and Financial Reporting papers, and underpins your understanding of the statement of financial position. The session begins with property, plant and equipment recognition, emphasising that only costs directly attributable to the asset—such as delivery—can be capitalised at purchase. Critically, you'll learn how to distinguish between capital expenditure that improves future economic benefit and repairs or maintenance that must be expensed immediately. The video explains why this distinction matters: misclassifying expenses as capital overstates your non-current assets and understates your profit or loss. You'll also discover the two measurement models available under IFRS: the cost model and the revaluation model, which allows assets to be carried at market value. The video then addresses depreciation and amortisation in detail. You'll learn the main methods—straight-line, reducing balance, and sum-of-the-digits—and understand that both the depreciation method and estimated useful life are judgements requiring annual review. Changes should only be made if they improve the reliability of the financial statements. The session covers the practical audit procedures you'll apply: verifying opening balances, testing additions against supplier invoices, obtaining and reviewing valuation reports for revalued assets, recalculating depreciation charges, and accounting for disposals with their resulting gains or losses. Finally, the video addresses rights and obligations, completeness, and existence assertions for non-current assets, drawing parallels to inventory testing. The session concludes with intangible assets, explaining the strict criteria for capitalisation: probable future economic benefits, intention to complete, available resources, technical feasibility, and reliable measurement. You'll learn the specific audit procedures for development expenditure and other intangibles, including tracing costs to supporting documentation, confirming technical feasibility with management, reviewing cash flow forecasts, and obtaining written representations of intent.

Duration: 12m