(R26) Long-Lived Assets Flashcards
Are tangible and intangible assets capitalized or expensed?
Tangible: capitalized on BS at cost Intangible: if acquired then capitalize on BS at cost
When an asset is expected to provide benefits for only the current period, its cost is expensed on the income statement for the period. If an asset is expected to provide benefits over multiple period, it is capitalized rather than expensed.
True
When PP&E is purchased through an acquisition, what costs are capitalized?
The purchase cost + all expenses necessary to get the asset ready for its intended use
When PP&E is constructed, what costs are capitalized?
All costs of construction + borrowing costs
For intangible assets to be capitalized, three conditions must be met
1) Assets must be identifiable (being separated from the company) 2) Under control of the company 3) Generate future economic benefits
How are purchased indefinite-lived intangible assets amortized?
Indefinite-lived intangible assets are not amortized, but are tested for impairment at least annually.
Are purchased intangible assets capitalized?
Yes
How do we deal with internally developed intangible asset costs?
These costs are expensed
Under IFRS, how do we deal with research and development costs?
Under IFRS, research costs are expensed but developed costs may be capitalized.
Under U.S. GAAP, how do we deal with research and development costs?
Under U.S. GAAP, both research and development costs are expensed as incurred, except in the case of software created for sale to others.
Goodwill
Purchase price of combination is greater than FV of new assets
Difference between cost model vs. revaluation model for long-lived assets. What model is used under IFRS and GAAP?
Cost Model (IFRS and GAAP): Carry an asset at cost - accumulated depreciation - any impairment. Used for tangible and intangible assets with finite useful lifes
Revaluation model (IFRS only): Carry asset at fair value - any subsequent depr./amort.
Do you have to use the same depreciation method for tax and reporting purposes?
Depreciation methods can differ, which gives rise to deferred taxes
When does a revaluation loss occur and where is it recorded? Aka downward revaluation
This occurs when the FV after revaluation is less than the original cost. The loss is recorded on the IS
When does a revaluation gain occur and where is it recorded? Aka upward revaluation
This occurs when the FV after revaluation is greater than the original cost.
Recorded in OCI in the revaluation surplus account.
Increases assets and equity
