Accounting for e.g. a Yacht

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jomaney
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Joined: 08 Feb 2021, 11:48

Accounting for e.g. a Yacht

Post by jomaney »

I had an exam today regarding IFRS and I have a question to one of the exam tasks.

Background:
A company that is operating in the field
of yacht rentals wants to buy a new yacht (Numbers are irrelevant right now). Which IFRS standard is applicable regarding that?

So my first thought was IAS 2 inventories but in the end I decided to use IAS 16 PPE due to question b)
I also think IAS 16 is correct but can someone explain me why IAS 2 inventories is wrong?

Thank you ☺️
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Marek Muc
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Re: Accounting for e.g. a Yacht

Post by Marek Muc »

As you're learning IFRS, it will be most useful to you if you arrive at the answer yourself 8-)

so have a read and let us know what you think, IAS 2 or IAS 16 and why?
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jomaney
Posts: 5
Joined: 08 Feb 2021, 11:48

Re: Accounting for e.g. a Yacht

Post by jomaney »

Thank you for your input. Re-reading IAS 16 the answer is clear to me.

„are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
are expected to be used during more than one period.“

I just wasn’t 100% sure at the time.
Leo
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Re: Accounting for e.g. a Yacht

Post by Leo »

I'd say IAS16 also because real estate companies that are in the rentals business recognize their acquisitions according to either IAS16 at cost either IAS40 at fair value.

So I'd say IAS16
jomaney
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Joined: 08 Feb 2021, 11:48

Re: Accounting for e.g. a Yacht

Post by jomaney »

Yes, I totally agree. In my examples, the Yacht is held for rental to others so it is definitely IAS 16.
JRSB
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Re: Accounting for e.g. a Yacht

Post by JRSB »

Maybe they lease it rather than buy :ugeek:
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