Accounting for Sanitary Landfills: Answer to the Illustrative Problem

SOLUTIONS AND DISCUSSIONS:
[See Accounting for Sanitary Landfills: Illustrative Problem]
http://theaudituniverse.blogspot.com/2016/05/accounting-for-sanitary-landfill.html

Generally, land has an unlimited useful life and therefore is not depreciated. In some cases, the land itself may have a limited useful life (in case of QUARRIES AND LANDFILLS), in which case it is depreciated in a manner that reflects the benefits to be derived from it. [International Accounting Standards 16, paragraphs 58-59]

If the cost of land includes the costs of site dismantlement, removal and restoration, that portion of the land asset is depreciated over the period of benefits obtained by incurring those costs. [International Accounting Standards 16, paragraph 59]

Thus, using these provisions from IAS 16, the following entries shall be provided by the RICH KIDS HOSPITAL for the year 2016:

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Accounting for Sanitary Landfill: Illustrative Problem

In 2014, the Private Hospital Regulatory Board (PHRB) passed a new resolution (effective January 2015) requiring all private hospitals to create its own sanitary landfill for its health care wastes.

As a response to this new regulation, RICH KIDS HOSPITAL (RKH) purchased a land P 20,000,000 to be used as a sanitary land fill. The hospital also incurred the following expense in relation to the construction of the land fill:

RKH estimated that the land fill can hold up to 175,000 cubic feet of compacted health care wastes. PHRB also requires that all landfill sites must be cleaned up and restored after reaching its maximum capacity. RKH provided a reasonable estimate of P 5,000,000 for the restoration costs. The actual compacted health care wastes for 2015 were 5,000 tons. 

How should the company account for the foregoing costs / expenses?

Note: See the Next post for the complete solution and discussion.

http://theaudituniverse.blogspot.com/2016/05/accounting-for-sanitary-landfills_27.html

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Accounting for Living Animals: IAS 16 or IAS 41: Answer to the Illustrative Problem

SOLUTIONS AND DISCUSSIONS:

[See Accounting for Living Animals IAS 16 or IAS 41: Illustrative Problem]
http://theaudituniverse.blogspot.com/2016/04/accounting-for-living-animals-ias-16-or.html

The following chart summarizes the accounting treatment on Living Animals:

Using the chart above it is appropriate for the entity (MEOW Philippines Corporation) to classify and present their living animals (tigers) Property, Plant and Equipment (IAS 16) rather than as Biological Assets under IAS 41

Under IAS 16, these living animals will be measured initially at COST. Subsequently, these items will be measured using either Cost Model (cost less any accumulated depreciation and any accumulated impairment losses) or Revaluation Model (Revalued amount less any subsequent accumulated depreciation and subsequent accumulated impairment losses), depending on the entity’s accounting policy.


Thus, assuming the entity chose COST MODEL to account for their Property, Property and Equipment, the following entries shall be provided by the MEOW Philippines Corporation for the current year:

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