FAR 4 - Fixed Assets Flashcards
How do you record valuation of fixed assets under U.S. GAAP?
1) Historical cost = purchase price
Purchase price could be cash, note payable.
2) Donated Fixed assets given to you
Dr: Fixed Asset (FMV)
Cr: Gain on nonreciprocal transfer
How do you record valuation of fixed assets under IFRS?
1) Cost model = Historical cost - Accumulated depreciation - impairment.
2) Revaluation model = Fair value at revaluation date - Subsequent accumulated depreciation - subsequent impairment
Revaluation Loss - goes in income statement
Revaluation Gain - goes in OCI
Impairment - Take out revaluation gain from OCI and then put in income statement
Can you use revaluation model of IFRS on class of fixed assets or individual?
Always class of fixed assets
What items do you include in equipment cost?
1) Invoice price
2) Less cash discounts
3) Add freight-in
4) Add installation charges
5) Add sales and federal excise taxes
6) Possible addition of construction period interest
How do you record additions made to equipment?
Dr: Asset (machinery, etc.)
Cr: Cash/accounts payable
How do you record improvement and replacement of equipment?
CAPITALIZE THE IMPROVEMENT OR REPLACEMENT
1) If carrying value of old asset is known, remove it and recognize any gain or loss. Capitalize the cost of the improvement or replacement to asset account.
2) If carrying value of old asset is unknown,
If it increases life
Dr: Accumulate Depreciation (lowers NBV)
Cr: Cash/ accounts payable
If it increases usefulness
Capitalize
How do you record repairs made to equipment?
1) Ordinary repairs get expensed
2) Extraordinary repairs get capitalized
What costs are included in land?
ALL COSTS INCURRED UP UNTIL EXCAVATION.
1) purchase price
2) brokers’ commissions
3) title and recording fees
4) legal fees
5) draining of swamps
6) clearing of brush and trees
7) site development
8) existing obligations assumed by buyer, including mortgage
9) Cost of razing
10) LESS SALE OF EXISTING BUILINGS
What costs are included in buildings?
ALL COSTS INCURRED INCLUDING EXCAVATION FORWARD
1) Purchase price
2) all repair charges neglected by previous owner
3) alterations and improvements
4) architect’s fees
5) possible addition of construction period interest
Difference between U.S. GAAP and IFRS for investment property?
IFRS - land or buildings held by an entity to earn rentals or for capital appreciation should be in a separate section called investment property
U.S. GAAP - does not include specific definition or set of accounting rules for investment property
What are two valuations for IFRS investment property measurement models?
1) Cost model - investment property is reported on balance sheet at historical cost less accumulated depreciation - FAIR VALUE STILL NEEDS TO BE DISCLOSED
2) Fair value model - investment property is reported on balance sheet at FAIR VALUE AND NOT DEPRECIATED.
If you are constructing your own building and have interest costs, how do you account for interest costs?
Interest costs for your own building that was constructed by you goes to FIXED ASSET (BUILDING)
DOES NOT GO TO PERIOD COST.
How do you account for interest costs for construction of some other companies building? (you take out loan in order to do construction)
Generally interest costs are expensed as incurred, HOWEVER construction period interest SHOULD BE CAPITALIZED BASED ON WEIGHTED AVERAGE OF ACCUMULATED EXPENDITURES (not loan amount).
When can you not capitalize interest on construction project (you are selling building)
1) Do not capitalize interest before or after construction period.
How to calculate weighted average accumulated expenditures for year?
The amount payments were made x (months payments were used for / 12)
