International accounting standards 8

Question 1

Property, plant and equipment/ plant assets/fixed assets (znaczenie)

Answer 1

rzeczowe aktywa trwałe

Question 2

characteristic of property, plant, and equipment

Answer 2

• Assets of a durable nature
• “Used in operations” and not for resale.
• Long-term in nature and usually depreciated.
• Possess physical substance
• Includes: Land, Building structures (offices, factories, warehouses), and Equipment (machinery, furniture, tools).

Question 3

acquisition (znaczenie)

Answer 3

nabycie

Question 4

Acquisition and measurement:

Answer 4

• are measured at historical cost (equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use)
• In general, costs include:
• Purchase price, including import duties and non-refundable purchase taxes, less trade discounts and rebates.
• Costs attributable to bringing the asset to the location and condition necessary for it to be used in a manner intended by the company.

Question 5

Cost od land (znaczenie)

Answer 5

koszty gruntów

Question 6

Cost of land:

Answer 6

• All necessary costs incurred in making land ready for its intended use increase (debit) the Land account
• cash purchase price
• closing costs such as title and attorney’s (adwokat) fees
• real estate brokers’ commissions
• accrued property taxes and other liens on land assumed by purchaser

Question 7

accrued property taxes (znaczenie):

Answer 7

naliczone podatki od nieruchomości

Question 8

liens on land (znaczenie)

Answer 8

zastawy na gruntach

Question 9

Land improvements (znaczenie)

Answer 9

ulepszenie terenu

Question 10

depreciation expense (znaczenie)

Answer 10

amortyzacja ŚT

Question 11

Characteristic of land improvements:

Answer 11

• Improvements with limited lives, such as private driveways, walks, fences, and parking lots
• Investment - Land acquired and held for speculation
• Inventory - land held by a real estate concern for resale

Question 12

Cost of buildings:

Answer 12

• Includes all expenditures related directly to acquisition or construction
• Professional fees and building permits
• Remodeling and replacing or repairing the roof, floors, electrical wiring, and plumbing
• Materials, labor, and overhead costs incurred (poniesione) during construction
• Companies consider all costs incurred, from excavation to completion, as part of the building costs
• Purchase price, closing costs (attorney’s fees, title insurance, etc.) and real estate broker’s commission

Question 13

excavation (znaczenie)

Answer 13

wykopy

Question 14

Cost of equipment:

Answer 14

• Include all costs incurred in acquiring the equipment and preparing it for use
• Cash purchase price
• Non-deductible sales taxes (VAT, excise – akcyza)
• dreight charges
• insuarance during transit paid by purchaser
• Assembling (złożenie), installing, and testing

Question 15

non- deductible (znaczenie)

Answer 15

niepodlegające odliczeniu

Question 16

expenditures (znaczenie)

Answer 16

nakłady

Question 17

expenditures:

Answer 17

expense
asset
-ordinary (zwykła) repairs
* expenditures to maintain (utrzymanie) the operating efficiency and productive life of the unit.
* debit to [Maintenance and Repairs] Expense
- Additions and Improvements
* costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset.
* debit the [plant] asset account
* referred to as capital expenditures

Question 18

amortization expense (znaczenie)

Answer 18

amortyzacja wnip

Question 19

What is depreciation?

Answer 19

Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
It applies to all plant assets except for land.

Question 20

Allocating costs of long-lived assets:

Answer 20

• Fixed assets = Depreciation expense
• Intangibles = Amortization expense
• Mineral resources = Depletion expense

Question 21

Three important factors of depreciation:

Answer 21

COST - All expenditures necessary to acquire the asset and make it ready for its intended use
Useful life - Estimate of the expected life based on need for repair, service life, and vulnerability to obsolescence (podatność na starzenie się)
Residual value - Estimate (oszacować) of the asset’s value at the end of its useful life

Question 22

Depreciation methods:

Answer 22

Management selects the method it believes best
measures an asset’s contribution to revenue over its
useful life. Examples include:
1) Straight-line method
2) Units-of-activity method
3) Declining-balance method

Question 23

Straight-line method:

Answer 23

• Expense is same amount for each year
• Depreciable base = Cost less residual value

Question 24

Units-of-Activity Method:

Answer 24

• Companies estimate total units of activity to calculate depreciation cost per unit
• Expense varies based on units of activity
• Depreciable cost is cost less salvage value
• Often referred (odniesione) to as units-of-production method

Question 25

Declining- Balance Method

Answer 25

- Accelerated (przyspieszona) method - Decreasing annual depreciation expense over asset’s useful life - Double declining- balance rate is double the straight-line rate - Rate applied to book value

Question 26

Depreciation and income taxes:

Answer 26

- Tax laws do not require taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements - Many companies use straight-line in their financial statements to maximize net income. - They also use an accelerated depreciation method on their tax returns to minimize their income taxes.

Question 27

Disposals (znaczenie)

Answer 27

zbycie

Question 28

Companies dispose of plant assets in three ways:

Answer 28

* Retirement (wycofanie): Equipment is scrapped (złomowany) or discarded (wyrzucany) * Sale: Equipment is sold to another party * Exchange: Equipment is traded for new equipment

Question 29

How record depreciation?

Answer 29

Record depreciation up to the date of disposal.

Question 30

Eliminate asset by:

Answer 30

(1) debiting Accumulated Depreciation, and (2) crediting the asset account.

Question 31

Retirement (znaczenie)

Answer 31

wycofanie z użytku

Question 32

Retirement:

Answer 32

- no cash is received - Decrease (debit) Accumulated Depreciation for full amount of depreciation taken over life of asset - Decrease (credit) asset account for original cost of asset

Question 33

Sale:

Answer 33

- Compare the book value of the asset with the proceeds received from the sale. - If proceeds exceed the book value, a gain on disposal occurs; if proceeds are less than the book value, a loss on disposal occurs (Jeżeli wpływy przekraczają wartość księgową, następuje zysk ze zbycia; jeśli wpływy są niższe niż wartość księgowa, następuje strata ze zbycia)

Question 34

Natural resources:

Answer 34

- Natural resources consist of standing timber (drewno) and underground deposits of oil, gas, and minerals - Distinguishing characteristics: * Physically extracted in operations * Replaceable only by an act of nature - Cost is the price needed to acquire the resource and prepare it for its intended use.

Question 35

Depletion:

Answer 35

- The allocation of the cost to expense in a rational and systematic manner over the resource’s useful life. - Companies generally use units-of-activity method - Depletion generally is a function of the units extracted Total cost - residual value/ total estimated units available = depletion cost per unit

Question 36

Intangible assets (niematerialne aktywa):

Answer 36

- Identifiable; lack physical existence; not monetary assets - Rights, privileges, and competitive advantages - Normally classified as non-current asset - Limited life or indefinite life - Patents - Copyrights - Franchises and licenses - trademarks - trade names -goodwill

Question 37

Limited-life intangibles:

Answer 37

- amortize to expense - credut asset account or accumulated amortization

Question 38

Indefinite-life Intangibles:

Answer 38

- no foreseeable (do przewidzenia) limit on time asset is expected to provide cash flow - no amortization

Question 39

Intangible assets: patents

Answer 39

- Exclusive right to manufacture, sell, or otherwise control an invention for 20 years from date of grant (limited life) - Capitalize costs of purchasing a patent and amortize over 20-year life or its useful life, whichever is shorter - Expense any R&D costs in developing a patent - Legal fees incurred successfully defending a patent are capitalized to Patents account

Question 40

Intangible assets: copyrights

Answer 40

-Gives owner exclusive right to reproduce and sell an artistic or published work - granted for life of creator plus 70 years - capitalize cost of acquiring and defending

Question 41

Intangibel assets: Trademarks and trade names

Answer 41

- Word, phrase, jingle, or symbol that distinguishes or identifies a particular enterprise or product - Legal protection for indefinite number of 20-year renewal periods - Capitalize acquisition costs. No amortization

Question 42

Intangible assets: Franchises

Answer 42

- Contractual arrangement between a franchisor and a franchisee - For example: CPC, Subway, and Europcar are franchises - Franchise (or license) with a limited life should be amortized to expense over its useful life - If life is indefinite, cost is not amortized

Question 43

Intangible assets: goodwill (wartość firmy)

Answer 43

- Includes exceptional management, desirable location, good customer realtions, skilled employees, high-quality products, etc. - only recorded when an entire business is purchased - goodwill is recorded as excess of purchase price over fair value of net assets acquired

Question 44

Research and development (R&D) cost are

Answer 44

not in themselves intangible assets.

Question 45

Research activities:

Answer 45

original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding

Question 46

Development activities:

Answer 46

Application of research findings or other knowledge to a plan or design to produce new or substantially improved materials, devices, products, processes, systems, or services before the start of commercial production or use.

Question 47

Research and Development Costs: Expense vs. Capitalize

Answer 47

- research costs must be expansed as incurred - development costs may or may not be expensed as incurred - capitalization begins when the project is far enough along in the process such that the economic benefits of the R&D project will flow to the company (the project is economically viable)