FAR 8 - Fixed Assets Flashcards
How should Asset Retirement Obligations (AROs) be recorded?
Either at fair market value (amount the ARO could be settled for today), or the present value of future cash flows
Accretion expense for an ARO is recorded at what value?
Credit adjusted risk free interest rate.
Journal entry for Accretion Expenses
DR Accretion Expense, CR ARO Liability
Journal entry for initial ARO Liability
DR Land xxx, CR cash, CR ARO liability
At what point are assets held for sale depreciated?
They are never depreciated. They are written down to NRV - net realizable value.
Capitalized interest is computed at the lesser of either of which two values?
Either the weighted average accumulated expenditure times the interest rate or the actual interest expense.
How to compute IFRS cost model
Figure depreciation per year according to each separate component, then add to get yearly depreciation amount.
What are the 3 rules for nonmonetary exchanges with commercial substance?
- FMV given up + cash paid (-cash received)
- FMV of asset received
- BV (book value) given up + cash paid (-cash received)
What are the rules for nonmonetary exchanges without commercial substance?
- Recognize all losses- item cannot be listed for more than what it is worth.
- Defer all gains (if no commercial subdstance, no realization under GAAP) UNLESS BOOT IS RECEIVED
- Record lowest of three values:(same 3 rules for Com Subst)
- FMV given up + cash paid (-cash received)
- FMV of asset received
- BV of asset given up +cash paid (-cash received)
What is formula for SYD depreciation method?
(Cost-Salvage value)*(# of years left in assets life) = depreciation
(sum of yearsin assets life )
Denominator = N(N+1)/2 where N= #years left in assets life.