University:
University at Buffalo
Course:
MGA 301LEC | Intermediate Financial Accounting I: Assets and Income Determination
Academic year:

2023
Views:

318

Pages:

2
Author:

Kinley Ortega

Chapter 11 PPE purchased with expectation it will provide future benefits Costs allocated to exp during periods of use Matching principle: requires net cost of an asset to be allocated to the Oyears the asset is in direct use Cost Allocation = Depreciation, depletion, amortization Plant & equip, natural resources, intangible assets Need to know 3 things: useful life - service life, use before disposal, units of time or activity Depreciable base - total cost, diff between cost & salvage value HC-Salvage Allocation method - time method passage of time, activity input or output Salvage value: amount expected to receive for an asset, don't disclose, assume 0 Recognition: reduces NBV by accum depreciation Depreciation expense (+SE) Accumulated depreciation (XA, A) Straight line depreciation: simple, ratable method recognized evenly over useful life not reality Straight line = Depreciation expense / Depreciable base useful life Sum of the years Digits: accelerated method, provides more benefits early on logical foundation Deprec = useful years remaining / Sum of years digits Sum of years digits = n(n+1)/2 n = useful life Depreciation expense = Depreciable base x Depreciation rate Declining Balance: accelerated, constant rate x declining balance do not depreciate lower than salvage value Deprec rate = straight line rate multiplied Depreciation expense = Depreciable rate x NBV Units of Production: activity based, input & output, must common Partial - Period Depreciation: • Half-year convention: record half depreciation in tre year of acquisition and another half in year of disposal • Assume asset was acquired /disposed midway leven if not true) Changes in estimates: changes in current perred & move forward Depletion: methods are the same, just for natural resources Impairments: should be written down if a signif impairment • no write -ups • D in FMV beget factoge in home asser is being used, physical condition of • accom of costs • realization that asset will be disposed of before Useful life PP&E is tested only when events indicate NeV may not be recoverable • recoverablility test • measurement Recoverability • if undiscounted sum of future cosh is < NEV, imparment needed Measurement: i The see he mount to be be poet or solt duress is measured transaction between willing parties • If the asset's FMV is unknown, the present value of future cash flows is often used as an • normally reported on IIS as separate item "If impaired, write-down + He to agnizes sMit accum dep to 0, •disclosure note required GARP requirements

Chapter 11 - Brandon Szerwo Lecture Notes

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