Fixed Assets Standard 1.

Scope of the Standard: 1/1 This Standard sets the requirements for measuring, presenting and disclosing fixed assets in the financial statements of for profit enterprises irrespective of their size and legal form. (Paragraph 101) 1/2 The paragraphs of this Standard should be read in conjunction ith the explanations given in the attached stud! and ithin the frame or" of The #ccounting $bjectives and %oncepts and the Standard on &eneral 'resentation and &eneral (isclosure. (Paragraph 102) 1/) This Standard applies to material items. 2. Objecti e of the Standard: The Standard sets the requirements for the measurement of fixed assets and their presentation and disclosure in the financial statements so that the financial statements present fairl! the financial position of the enterprise and the results of its operations. (Paragraph 10!) 3. "ext of the Standard: 3#1 $eas%re&ent and 'ecording of Fixed Assets on Ac(%isition: The fair value of the fixed asset at the date of acquisition *i.e. the cost of acquisition of the asset+ is considered the basis for its measurement and recording at the date of acquisition. The application of this method depends on the nature and the transaction method through hich the asset has been acquired as follo s, Asset Ac(%ired b) *xchange "ransactions: )/1/1 The fixed asset acquired in cash for use in the enterprise should be measured and recorded on the basis of the cash amount settled for the cost of its acquisition. The cost of acquisition includes the price of purchase of the asset, cost of freight, transport, insurance, custom duties and other direct costs incurred on the purchased asset in order to bring the asset to the set location and in a condition that ma"es it good for use, less an! immediate discount obtained b! the enterprise. (Paragraph 10+) )/1/2 The fixed asset acquired in exchange for an obligation should be measured and recorded on the basis of the present value of the amounts to be paid to settle the obligation. The difference bet een the obligation and the present value of the amounts to be paid to settle the obligation should be recorded as deferred finance costs that should be amortized on the basis of the prevailing interest rate, here this results in a periodical fixed interest rate on the remaining obligation balance. (Paragraph 10,) )/1/) The fixed asset acquired in exchange for issuance of shares should be measured and recorded on the basis of the fair value of the asset at the date of acquisition. (Paragraph 10-) (Paragraph 103)

)/1/- The fixed asset acquired in exchange for giving up of a dissimilar asset should be measured and recorded on the basis of the fair value of the asset given up. The losses or gains arising as a result of the exchange transaction should be recorded immediatel! as it occurs. .f the fair value of the acquired fixed asset is defined in a manner that is more accurate than the fair value of the asset given up, then the acquired asset should be recorded on the basis of its fair value. (Paragraph 10.) )/1// The fixed asset acquired in exchange for a similar asset should be measured and recorded on the basis of fair value or the net boo" value of the asset given up at the date of completion of the exchange transaction, hichever is lo er. 0osses realized as a result of this, if an!, should be recorded. (Paragraph 10/) )/1/1 .f a fixed asset as exchanged for a similar asset and a received cash amount from hich gains resulted from the exchange, the realized gains should be measured as the value of the exchange multiplied b! the percentage of the cash received to the total of the total cash received and the fair value of the acquired asset. The realized gains should be recorded immediatel! as the exchange transaction is completed. (Paragraph 110) )/1/2 3hen a group of fixed assets is acquired in one transaction the total cost of the transaction should be allocated to the acquired assets on the basis of the percentage of the fair value of each asset to the total fair value of the hole group. (Paragraph 111) Asset Ac(%ired b) 0on1*xchange "ransactions: )/1/4 The fixed asset acquired as a result of a transfer transaction ith parties ho are not the o ners and not involving an exchange should be measured and recorded on the basis of the fair value of the asset at the acquisition date. (Paragraph 112) Asset Ac(%ired b) Prod%ction 2ithin the *nterprise: )/1/15 The fixed asset produced b! the enterprise for the purpose of use should be measured and recorded on the basis of the cost of ra materials or produced materials in addition to the cost of conversion and formation that are made up of the direct and indirect manufacturing costs and the other costs necessar! to bring the asset to the set location and in a condition that ma"es it good for use. 'rovided that, #. The enterprise follo s uniform policies to distribute costs. 6. The required indirect manufacturing costs are distributed on the basis of the normal production capacit!. %. 7ixed assets are charged ith a portion of the non8manufacturing costs of the accounting period up to the limit hereb! this portion has a clear relationship to bring the asset to its set location and in a condition that ma"es it good for use. (Paragraph 113) )/1/11 The fixed asset produced b! the enterprise should be recorded hen it is good for use at cost or the fair value, hichever is lo er. The difference bet een the asset9s cost and its fair

value should be charged in the accounting period during use.

hich the fixed asset becomes good for (Paragraph 11!)

3#2 $eas%re&ent and 'ecording of the Fixed Asset after Ac(%isition: )/2/1 The recorded fixed asset should be measured and disclosed in the financial statements of the periods follo ing its acquisition date, at historical cost after adjusting for accumulated depreciation. (Paragraph 11+) )/2/2 The fixed asset that an enterprise decides to dispose of b! sale or b! retirement should be measured at its historical value after deducting accumulated depreciation or at fair value hichever is lo er. The gains or losses should be measured and recorded as follo s, #. The gains or losses resulting from the disposal of the asset b! sale or other ise should be computed on the basis of the difference bet een the boo" value and net amount received from the transaction. 6. The unrealized losses resulting from the decision to dispose the asset should be recorded immediatel! upon ma"ing the decision to dispose and should be charged to the profit of the period here the decision to dispose is made. %. :ealized losses and gains should be recorded immediatel! hen the! occur. (. ;nrealized gains resulting from a decision to dispose or retire an asset should not be recorded. (Paragraph 11,) )/2/) The enterprise should cease computing depreciation on the fixed assets that ill be disposed of immediatel! upon ma"ing the decision to dispose. (Paragraph 11-) )/2/- The cost of a depreciable asset should be allocated over the productive life of the asset using the depreciation policies that are most suitable for the enterprise9s method of depreciating the economic benefits available ithin the asset. (epreciation should be charged to the period. (Paragraph 11.) )/2// 'aragraphs <2- to <45 of the Standard on &eneral 'resentation and (isclosure should be adhered to in the treatment of the change of the depreciation method. (Paragraph 11/) )/2/< .f the fixed asset is full! depreciated and is still in use, or if during the period of use of the asset information becomes available that affects the productive life of the asset, it is required to treat the change in the productive life of the asset as follo s, ). .f the change in estimate results from, ). #vailabilit! of ne information affecting the previous accounting estimates that available hen approving the previous estimate. ). The enterprise gaining additional experience relating to the concerned asset. ). $ccurrence of ne events resulting in change to one of the estimates.
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as not

.n this situation the change should be treated as a change in accounting estimates in accordance ith 'aragraphs <41, <42, <4), <4-, 2/1, 2/2 and 2/) of the Standard of 'resentation and &eneral (isclosure. 6. .f the change in estimate results from information that as available hen approving the previous accounting estimates, but those ere not used at the time, then in this case the change should be treated as correction of an error in the financial statements, in accordance ith 'aragraphs <42, <44 and 2/1 of the Standard of 'resentation and &eneral (isclosure. (Paragraph 120) )/2/1 #mounts spent on a fixed asset after its acquisition should be capitalized, if the! result in future economic benefits, in excess of estimated standard performance of the asset, and or the estimated productive life of the asset. #mounts that do not result in future economic benefits should be recorded as costs hen the! occur. (Paragraph 121) 3#3 Finance 3osts: )/)/1 7inance costs directl! relating to a fixed asset hose construction or production period to become good for use require a long period of time, should be capitalized and considered to be part of the cost of the asset, provided all the follo ing conditions are met. #. %ommencement of actual expenditure on the asset. 6. 7inance costs are borne b! the enterprise. %. %ontinuation of the necessar! activit! to ma"e the asset good for use. (Paragraph 122)

)/)/2 The enterprise should cease to capitalize finance costs hen the or" in construction or production of the asset ceases for a long period of time, unless such cessation is a normal matter for the construction or production of the asset. (Paragraph 123) )/)/) The enterprise should cease capitalizing finance costs hen all the necessar! activities required in ma"ing the asset good for use are significantl! completed. (Paragraph 12!)

)/)/- %apitalization of finance costs should cease for each part of the asset hen this part of the asset is complete, provided that each of these parts can be used during the construction or production of the other parts of the asset. (Paragraph 12+) )/)// 7inance costs to be capitalized should be reduced b! an! income realized b! the enterprise resulting from the temporar! investment of the borro ed funds. (Paragraph 12,) )/)/< 7inance costs to be capitalized should be computed b! appl!ing the capitalization rate to the average amounts spent on the fixed asset during the period, provided that the capitalized finance costs during the period are not in excess of the total finance costs borne b! the enterprise during the period. (Paragraph 12-)
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!. Presentation: 7ixed assets should be presented as a group ithin non current assets on the face of the balance sheet and should be classified in accordance to their nature into items either on the face of the balance sheet or ithin the notes to the financial statements. #ccumulated depreciation should be deducted from the cost of the related fixed assets. (Paragraph 12.) +. 4isc5os%re: //1 The 7inancial Statements should disclose the follo ing, //1/1 The accounting polic! adopted for measurement, recording and presentation of fixed assets in the financial statements. (Paragraph 12/) //1/2 The depreciation methods used. //1/) The useful lives and depreciation rates of fixed assets. (Paragraph 130) (Paragraph 131)

//1/- %hanges in the boo" value occurring during the period including the follo ing, #. $pening balance of cost. 6. #dditions. %. (isposals. (. 7ixed assets acquired b! merging enterprises. =. :eductions in historical cost. 7. (epreciation charged for the period. &. #ccumulated depreciation at the beginning and end of the period. (Paragraph 132)

//1/< 7ixed assets ith restrictions including nature and value of the restrictions. (Paragraph 133) //1/1 7ixed assets mortgaged as guarantee for liabilities including nature and value of the mortgage. (Paragraph 13!) //1/2 7ixed assets under construction clarif!ing their nature *'rojects under execution+. (Paragraph 13+) //1/4 The value of contractual commitments for fixed assets. //1/15 %hanges in the depreciation method, its effect and the reasons thereof. (Paragraph 13,) (Paragraph 13-)

//2 .f the enterprise decides to dispose of a fixed asset, disclosure should be made of the t!pe and net boo" value of the fixed asset to be disposed and the date of the decision to dispose. (Paragraph 13.) //) 7inance costs of capitalized fixed assets and capitalization rate. ,. 4efinitions: ,#1 Fixed Assets: #n! item ith a tangible existence that has the abilit! to provide the enterprise ith services or economic benefits in the future, and the enterprise acquired its right in it resulting from events or transactions that occurred in the past, provided it can currentl! be measured financiall! ith an acceptable degree of confidence, and it is not directl! attached to an immeasurable obligation and the purpose of its acquisition is for use in more than one financial period. (Paragraph 1!0) ,#2 0or&a5 3apacit): This is the average production expected to be obtained under normal conditions during various c!cles or seasons ta"ing into consideration the lost capacit! resulting from planned maintenance. (Paragraph 1!1) ,#3 Fair 6a5%e: The value for hich an asset could be exchanged bet een "no ledgeable and illing parties in a free transaction bet een them. (Paragraph 1!2) ,#! Si&i5ar Asset: #n! asset similar or comparable to another asset provided that the t o assets belong to the same t!pe and perform the same tas"s or are used in the same production line. (Paragraph 1!3) ,#+ *cono&ic 7enefits: 7uture benefits or services that help in a direct or indirect manner to provide cash flo s. (Paragraph 1!!) ,#, 4epreciation: 3hat is charged to the income of a period for the allocation of the depreciable asset9s cost in a sensible and s!stematic manner during the productive life of the asset. (Paragraph 1!+) ,#- "he 4epreciab5e Fixed Asset8s 3ost: This is the fixed asset9s historical cost less the estimated scrap value, if an!, at the end of its productive. (Paragraph 1!,) (Paragraph 13/)

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,#. 4epreciation $ethods: These are the methods that in accordance ith hich, the depreciation is charged to a period9s income statement during its productive life, for example the straight line method and the reducing balance method etc. (Paragraph 1!-) ,#/ "he Asset8s Prod%cti e 9ife: This is the time period during hich the asset is expected to be used. The productive life ma! be set as the total units of production or similar, that an enterprise is expected to obtain from an asset. (Paragraph 1!.) ,#10 "he Asset8s 0et 7oo: 6a5%e: This is the asset9s historical cost adjusted b! the balance of its accumulated depreciation. (Paragraph 1!/) ,#11 3apita5i;ation 'ate: 3hen funds are generall! borro ed and utilized to obtain a qualif!ing asset, then the finance cost that qualif! for capitalization is set b! appl!ing the capitalization rate to the capital expenditure on the asset. The capitalization rate is the average cost of the loans borro ed b! the enterprise during the period, except for the borro ing specificall! set to acquire a qualif!ing asset. (Paragraph 1+0) ,#12 "he Asset <%a5if)ing for 3apita5i;ation of its Finance 3osts: The fixed asset hose construction or production requires a long period of time is order to ma"e it good for use. (Paragraph 1+1) ,#13 Finance 3osts: These are the ban"ing commissions and other costs that are borne b! an enterprise for borro ing funds. These ma! include the follo ing, #. %ommisions on ban" overdrafts or borro ing. 6. #mortization of discounts or allo ances relating to borro ing. %. #mortization or reduction of additional costs for arranging the borro ing. (. 7unding expenditure relating to capital leases. =. %urrenc! differences arising from borro ing foreign currencies ithin limits considered to be adjustments to interest costs. (Paragraph 1+2) ,#1! 4isposa5 of an Asset:
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(isposal of an asset means removal of an asset from service b! a decision of the enterprise9s management to cease emplo!ing the asset or to sell it, either due to the asset not being good for use or not required for use in the business or that the benefits derived from the asset have become less than its operating costs. (Paragraph 1+3) -. *ffecti e 4ate of Standard: 7inancial statements for a financial period starting after the issuance of this Standard should be prepared in accordance ith this Standard. (Paragraph 1+!)

0ote: "his Standard =as appro ed b) the SO3PA 7oard on 22#2#1!22 ($a) 1,> 2001)