Spare parts and tools.pptxVIP

Accounting For Spare Parts Controller Supply Chain Quality Tobias Mesecke 2 Updated Policy on Accounting for Spareparts (Finance and Accounting Directive K007/11PL) Objectives of New Guideline Highlights Main change: FROM (012/09PL): All spareparts are reported as inventory; with value adjustment for obsolescence (50% after 12 months, 100% after 24 months). TO (K007/11PL): Depending on expected asset type and timing of usage, capitalization of spareparts as either inventory or as PPE. Added to K007/11PL: Specification of Accounting Treatment Reference in K007/11PL: Philips policy choice for PPE: Capitalization threshold EUR 5K. The purpose is to update the spareparts directive to provide sector-wide guidance on the valuation and accounting treatment of spare parts, reflecting Philips accounting policies. With its launch, this guideline supersedes instruction 012/09PL. 3 Classification of Spareparts – a decision flow chart Decision Flow - Chart Objective of Ownership? Held for sale? Usage associated with a specific PPE OR different types of PPE Time of Usage planned? Usage expected to be more than 1 year (= PPE) or less than a year (= Inventory) 5K PPE capitalization threshold Value 5,000 EUR – expense Value 5,000 EUR – capitalize See slide : Bulk purchase 4 Inventory PPE Spare parts classified as PPE are depreciated on a systematic basis over their useful lives (the shorter of: the individual useful live of the spare part or the remaining useful life of the related main asset). Spare parts in excess of 1 year demand, where no alternative use exists, should be written-off completely. In case the NRV is lower than cost, spare parts should be measured at its lower NRV. Spareparts – Valuation Depreciation Damaged spare parts are generally written-off in full, unless the ORU can prove that there is market for this. In this case, it should be written-down to its expected selling price, less any costs to sell these inventories (e.g. transportation, im