ACCA Advanced Taxation (ATX) Practice Exam

In relation to non-current assets, what is the minimum cost for single computer items to qualify?

1. £20,000

2. £10,000

3. £50,000

4. £100,000

The correct answer is: £50,000

The correct answer regarding the minimum cost for single computer items to qualify as non-current assets is indeed based on specific standards surrounding asset capitalization. For an item to be classified as a non-current asset, it typically needs to exceed a minimum threshold. This threshold is often set to ensure that only significant purchases are capitalized and recorded on the balance sheet, which serves to provide a more accurate representation of the company’s financial standing. The standard qualifying cost for single computer items is typically at least £50,000. This amount ensures that the capitalized asset is material to the financial statements, meaning it significantly impacts the business's operations and financial health. Assets below this cost are usually expensed immediately rather than capitalized, as they do not represent a significant investment in the company’s operations. When evaluating thresholds for capitalization of assets, various factors including company policy, accounting standards, and the nature of the asset play a critical role. Capitalizing at a higher threshold like £50,000 can streamline accounting processes, reduce administrative costs, and ensure that only meaningful investments reflect as assets on the balance sheet. In light of this, while other amounts may appear as plausible minimums for other contexts, the essential point is that a threshold of £50,000 accurately reflects