23.1-23.4 Long-lived assets

Question 1

Expensing a cost indicates it is …

Answer 1

Included on the income statement and subtracted from revenue to determine profit.

Question 2

Capitalizing indicates that the cost has been …

Answer 2

Determined to be a capital expenditure and is accounted for on the balance sheet as an asset, with only the depreciation showing up on the income statement.

Question 3

Revaluation model - under IFRS, the process of …

Answer 3

Valuing long-lived assets at fair value, rather than at cost less accumulated depreciation.

**Not permitted under US GAAP

Question 4

3 Depreciation methods:

Answer 4

• Straight line depreciation expense = depreciable cost / estimated useful life
• DDB depreciation expense = 2 x straight-line rate x beginning book value
• Units of production depreciation expense per unit = depreciable cost / useful life in units

Question 5

2 key difference between COST and REVALUATION models:

Answer 5

1. Cost model allows only decreases in the values of long-lived assets compared with historical costs.

2.Revaluation model may result in increases in the values of long-lived assets to amounts greater than historical costs.

Question 6

Impairment Write-downs under IFRS:

Impairment Reversals under IFRS:

Answer 6

Required

Allowed

Question 7

Impairment Write-downs under US GAAP:

Impairment Reversals under US GAAP:

Answer 7

Required

Not permitted