Deck #8 (F3) Flashcards
what is component depreciation
separate depreciation of each part of an item of PPE that is significant to the total cost of the FA. (IFRS requires it and it is more accurate)
JE:
disposal of asset
DR: Cash
DR: Accum Depre
CR: Asset
how to calculate straight line depreciation?
(Cost - salvage value) / estimated useful life
how to calculate sum of years digits depreciation?
(Cost - Salvage Value) x (Remaining life of asset / sum of years digits)
Note: sum of years digits is Nx(N+1)/2, where āNā is the estimated useful life
how to calculate units of production depreciation?
- (Cost-Salvage Value)/Estimate units or hours = rate per unit or hour
- Rate per unit or hour x number of units or hours
how to calculate declining balance depreciation?
2 x (1/estimated useful life) x (cost-accum depreciation)
JE:
sale of an asset
DR: Cash received
DR: Accum depreciation sold
CR: Sold asset at cost
CR: difference is the gain/loss
JE:
write off of fully depreciated asset
DR: Accumulated depreciation
CR: old asset at full cost
what are the two types of intangible assets and how are they treated?
- purchased (capitalized)
2. internally developed (expensed)
examples of costs related to internally developed intangibles that ARE NOT capitalized?
- legal fees
- consulting fees
- design costs
- unsuccessful defense of the asset
Capitalized costs related to intangibles assets can be amortized IF
they have a finite life. (with straight line)
a change in the useful life of an intangible asset has what effect?
prospective effect, (change in accounting estimate)
under IFRS: where are revaluation losses and gains recorded?
losses: IS
gains: OCI
What is the method of determining impairment of an intangible asset with a FINITE life?
Step 1: carrying amount of the asset is compared with the sum of the undercounted cash flows expected to result from the use of the asset
Step 2 (if Step 1 fails): if carrying amount exceed the total UFCF, then the asset is impaired
