Term
Firms that capitalize costs and depreciate them over time show _____ patterns of reported income.
Firms that expense those costs as incurred tend to have _____ variability of net income. |
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Definition
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Term
Cash expenditures for capitalized assets are included in _____ cash flows and never classified as CFO.
Cash expenditures for expensed outlays are included in _____ and never classified as investing cash flows. |
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Definition
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Term
| Capitalization firms have _____ debt-to-equity and debt-to-assets ratios since they report higher assets and equities. |
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Definition
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Term
| The amount of interest that may be capitalized under GAAP is: |
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Definition
The lower of actual interest or avoidable interest
Avoidable interest is computed even if the firm used financing other than debt for the project. The rationale is that if the firm had not engaged in the project, it would have used the non-debt financing to pay down debt. GAAP limits the capitalization of interest to the avoidable amount if it less than actual costs incurred. |
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Term
| Under SFAS 34, interest is capitalized for certain assets and then only if the firm is (leveraged / unleveraged) |
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Definition
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Term
| Generally, internal generated assets, such as costs of R&D, patents and copyrights, brands and trademarks, advertising and goodwill must be expensed in the period incurred, except for _____ incurred in registering internally developed patents and copyrigh |
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Definition
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Term
| SFAS 86 requires that all R&D costs to establish the technological and/or economic feasibility of the software must be _____ (expensed / capitalized). |
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Definition
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Term
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Definition
| the change in the market value of capital over a given period. It is calculated as the market price of the capital at the beginning of the period minus its market price at the end of the period. |
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Term
| Sinking Fund (or Annuity) Depreciation |
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Definition
| is not accepted by the U.S. GAAP. |
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Term
| Sum of years digits depreciation |
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Definition
| (Depreciable life of Asset - Current Year + 1) x (Cost Basis - Salvage Value) / Sum of Years |
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Term
| Double Declining Balance (Depreciation) |
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Definition
| 2 x (cost - accumulated depreciation)/(assets life) |
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Term
| * Unit of Production Method (Depreciation) |
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Definition
Depreciation [per period] = Output [per period] x Unit Cost
* Unit Cost = (Cost - Salvage Value)/Estimated Production Capacity or Estimated Service Life |
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Term
| Changing the depreciable life has no effect on cash flows, since ______. |
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Definition
| depreciation is a non-cash charge |
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Term
| Note that MACRS assumes there is no _____. |
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Definition
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