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ch 10 LN NOA acquisition final version

ch 10 LN NOA acquisition final version - Operatingassets...

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10-1 Ch 10 Investments in Noncurrent  Operating assets Learning Objectives 1. Properly account for noncurrent operating asset acquisitions  using various special arrangements, including deferred payment,  self-construction, and acquisition of an entire company.  2. Separate costs into those that should be expensed immediately  and those that should be capitalized.  3. Recognize intangible assets acquired separately, as part of a  basket purchase, and as part of a business acquisition. 4. Discuss the pros and cons of recording noncurrent operating  assets at their fair values.
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10-2 Time Line with Long-Term Operating  Assets
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10-3 Properly account for noncurrent operating assets acquisitions using various special arrangements, including self-construction, and acquisition of an entire company. OBJECTIVE 1 Basket purchase : A number of assets may be acquired in for one lump  sum. lease   is a contract whereby one party (the lessee) is granted a right to  use property owned by another party (the lessor). A firm can acquire a new asset by exchanging or trading existing  nonmonetary   assets . A firm can construct a new asset by itself (i.e.,  Self-Construction ).
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10-4 Interest Capitalization When assets are acquired by  self-construction  for an  enterprise’s own use and for assets that are intended to be  sold,  interest  incurred on funds borrowed to finance  construction can be  capitalized  if the following conditions are  met: Projects are discrete Costs are separately accumulated Construction covers an extended period of time Construction costs are substantial Interest should   not  be capitalized for inventories  manufactured or produced on a repetitive basis.
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10-5 IAS 23 • Original requirements – Benchmark treatment: Borrowing cost shall be  expensed  in  the period when incurred.
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