[Rebornalphawolf]

Upon first-time adoption of IFRS, an entity may elect to use fair value as deemed cost for

A. Biological assets related to agricultural activity for which there is no active market.

B. Intangible assets for which there is no active market.

C. Any individual item of property, plant and equipment.

D. Financial liabilities that are not held for trading.

I’m guessing D as the first two aren’t possible due to no active market, and the third seems to be bad mojo. If you pick and choose assets at random, then you can manage earnings or something. Anyways, I saw this question, and it had no answer. Also, I don’t see an answer from the Becker material either, even though I’m looking at it. >.<

[Anonymous]

The answer is C.

Deemed cost

2.9 Fair value may be used as deemed cost for any item of property, plant and equipment (PPE) at the date of transition. A revaluation made under previous GAAP may also be used as deemed cost if the revaluation resulted in a carrying amount that was broadly comparable to fair value at the time of the valuation or was based on a price index that was applied to cost. In addition, a first-time adopter may have established a deemed cost for assets and liabilities in accordance with previous GAAP by measuring the assets at their fair value at one particular date because of an event such as a privatisation or initial public offering. These event-driven fair value measurements may be used as deemed cost for IFRSs at the date of that measurement. This exemption may be applied to any individual item of PPE. An entity that uses the exemption is not required to adopt a policy of regular revaluation under IAS 16, ‘Property, plant and equipment,’ in future periods. A similar exemption may be applied to investment property and to intangible assets for which there is an active market. [IFRS 1 App D paras D5 to D8].

[Author]

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