plant assets, fixed assets

-operations not resale

-long term

-physical substance

cash or cash equivilant price necessary for its intended use

-recognize gains/losses when asset is sold

1-purchase price

2-title, attorney fee, recording fee

3-grading, filling, draining, clearing

4-liens, mortgages, encumberances

5- land improvements indefinite life

Land Improvements (Limited lives)

fences and parking lots

speculation = investment

resale = inventory

materials, labor, and overhead during construction

prof fees and permits

1-purchase price

2- freight charges

3- insurance transit

4- special foundations

5- installation costs

6- costs of trial runs

1- materials and direct labor

2- overhead, no or portion

1- qualifying assets

2- capitalization period

3- amount to capitalize

interest costs cap. part of plant not the land

interest revenue not offset against interest costs

fair value given up

fair value of asset received

-fair value of the asset to value on books

- recognize contributions received as revenues in period

-not handled retrospectively

-not considered errors or extraordinary items

impairments

(5)

1-decrease in fair value of asset

2- change in manner asset is used

3- change in legal factors

4- costs in excess of amount expected

5- forecast that demonstrates losses

1- complete removal

2- replacement by act of nature

recoverable reserves (3)

1- changes in estimates

2- depletion on prospective basis

3- remaining costs divided by new estimate

liquidation dividends

-GAAP component depreciation is permitted but is rarely used

-GAAP does not permit revaluations of ppe or mineral resources

lack physical existence

not financial instruments

-recorded at cost

-includes costs to make asset ready

-price, fees, expenses

-generally expensed

-capitalize direct costs in developing

limited life (4)

1- amortize by charge over useful life

2- credit asset account

3- useful life when asset is used

4- amortization cost less residual value

1- no limit

2- no amortization

3- test impairment annually

trademarks

-indefinite 10 year renewals

-capitalize acquisition costs

- no amortization

customer lists, order or production backlogs

- amortized expense over useful life

plays, literary work, musical works

- copyright for life of creator plus 70 years

-capitalize costs of acquiring

-amortize over useful life

contract-related intangible assets

franchise, licensing

-franchise limited life amortized expensed over life

-indefinite life carried at cost and not amortized

patented technology and trade secrets

-20 years

-capitalize costs of purchase

-expense r&d costs

-amortize over useful life

-only recorded when an entire business is purchased

-internally created goodwill should not be capitalized

-indefinite life

-not amortized

-adjust carrying when impaired

-puchase price less than fair value

-amount is gain by the purchaser

1- fair value less carrying amount

2- fair value of goodwill compare to carrying amount