Lecture_15_FA_Blackboard

Lecture_15_FA_Blackboard - Accounting for Fixed Assets...

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Accounting for Fixed Assets
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Session Objectives Is fixed asset measurement important? Should capital expenditures be treated as an asset or an expense? Are there different ways of depreciating an asset? Do accounting choices impact reported earnings? How is goodwill accounted for? What is an asset impairment?
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Fixed asset = an economic resource that will benefit the firm for more than a year Major Fixed Asset Categories: Land Plant and Equipment Natural Resources Intangibles Long-term Investments
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Fixed Assets Why is accounting for fixed assets so important?
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Why is fixed Asset Measurement Important? 1. Provides investors with information regarding an asset’s remaining service potential; i.e., ability to generate future earnings. 2. Gives creditors some idea of the security behind their claims. 3. Depreciation expense can have a significant impact on reported earnings. 1. Asset values are used by analysts to estimate a firm’s future earnings.
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Accounting for the Acquisition of a FA Cost of land includes: purchase price title insurance legal fees costs to record deed local transfer taxes
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Asset vs Expense?
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TANGIBLE FIXED ASSETS What does the term, cost , mean? Cost – all expenditures incurred to get a fixed asset ready for use, Example: If GE imports a piece of machinery from Japan, cost = purchase price + transportation cost, insurance, set up costs, FX losses, etc. If GE shells out $1,000,000 for the machine, is it an asset or an expense? Differences in accounting choice affects the balance sheet and income statement in significant ways. Management discretion in accounting treatments can result in manipulation of reported earnings.
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Accounting for Oil and Gas FASB requires oil and gas firms to expense all dry hole costs (successful efforts treatment). SEC permits capitalization of dry hole costs (full cost treatment). Statement effects? a) Carrying
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This note was uploaded on 05/24/2008 for the course ACC 203 taught by Professor Choi during the Spring '08 term at NYU.

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Lecture_15_FA_Blackboard - Accounting for Fixed Assets...

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