Long Lived Assets Flashcards
How can we record something capitalize
-probable that future economic benefit will flow to the entity
- result of a past transaction
- cost is realizably measurable
-analysis requires professional judgement
Why dies company are biased to capitalize
-increase net income in the short term
- smooth expense recognition over time through depreciation
- no impact to free cash flow
-improves solvency measured based on assets
-investing in the business viewed favorably by analyst
-Capex often viewed as contributing to the community
What subsequent expenditure can be cap
Improvement only:
Extend life of asset
Enhance the functionality of the assets
Change required by law
Criteria to recognize intangible assets
Cost reliably measure
Provides a future economic benefit
Identifiable:
Capable of being separated or divided from the entity
Arises from contractual or other legal rights
Internally generated intangible assets
-employee training
Brand development
Adviertising
Building customer relstionship
These cost are expenses because they dont generate an item which is separable from the com’any
Development cost cap?
Can be cap if show:
Technical feasibility to com’mete
Abilitiy to use or sell the intangible
Future economic benefits
Adequate resource exist to complete
Cost reliably measurable
