F4 Notecards- Deck #3 Flashcards
3 Characteristics of fixed assets:
1- for use in operations; not for resale
2- long term in nature; subject to depreciation
3- physical items
4 Classifications of fixed assets
1- land
2- buildings
3- equipment
4- accumulated deprecation (cost - AD = NBV)
What financial statement are fixed assets shown on?
Balance sheet (or footnotes) at cost
Historical cost AKA
Purchase price
2 Ways to recognize fixed assets under IFRS
1- Cost Model
2- Revaluation Model
Cost Model (IFRS)
- Just like US GAAP
- Reported at cost, adjusted for AD and impairment
Revaluation Model (IFRS)
- Classes of fixed assets
- Revalued at fair value frequently
Revaluation losses shown on what statement:
Income Statement
Revaluation gains shown on what statement:
OCI
Steps to recognize impairment of fixed assets (IFRS)
1- Take out of OCI any gains previously reported
2- Put loss on I/S
Several commons Costs of Equipment
- Invoice price
- Less cash discounts
- Add freight in
- Add installation charges (rearrange)
- Add sales and excise taxes
Additions: capitalize or expense?
Capitalize
Improvements and Replacements: capitalize or expense?
Capitalize
Repairs: capitalize or expense?
Expense if ordinary
Capitalize if extraordinary
Cost of Land include
Anything before digging a hole for the foundation
Examples: purchase price, commissions, title fees, legal fees, draining, clearing site, filling in/leveling site, etc.
Common Land Improvements
Are depreciable
Examples: fences, water systems, sidewalks, lighting, etc.
Cost of Building include
Excavation and forward
Examples: purchase price of building, all repair charges from previous owner, alterations, architect fees, etc.
If Basket purchase of land and building:
Allocate purchase price based on ratio of appraised values
Investment Property Definition
A rental or property to flip
Accounting for Investment Property (IFRS Only)
- US GAAP does not have special rules
- Capitalize anything except normal maintenance and day-to-day costs (expense those)
2 Investment Property measurement models
1- Cost Model
2- Fair Value Model (not depreciated)
Only capitalize interest on:
Money actually spent, not on the total amount borrowed
The amount of capitalized interest is the lower of:
1- Actual interest cost incurred OR
2- Computed capitalized interest (avoidable interest)
When to capitalize interest
DURING construction, expense after
